2006 (1) TMI 549 - HC - Central Excise

Summary

Issues:
Challenge to imposition of penalty under Section 11AC of the Central Excise Act, 1944 for duty short-paid after 28th September, 1996.

Analysis:
The appellant, a manufacturer of various spirits, challenged an order by the Appellate Tribunal rejecting their appeal against the imposition of penalty and directing the Commissioner to reassess the penalty under Section 11AC of the Central Excise Act, 1944. The dispute arose when authorities found that the denaturant used in manufacturing denatured spirit was supplied free of cost by buyers, leading to an under-valuation of the spirit cleared to bulk buyers. Consequently, a differential excise duty of Rs. 97,358 and a penalty of Rs. 1,00,000 were imposed. The Tribunal upheld the penalty, prompting the appellant to challenge it on the grounds that they had disclosed the receipt of benzene as free of cost in their returns, indicating no intention to evade duty. The respondent supported the penalty order.

The High Court noted that the assessable value of the denatured spirit should have included the value of the denaturant, which was not done by the appellant. The penalty under Section 11AC of the Act was imposed for the period before 28th September, 1996, when the relevant section came into effect. The appellant failed to show the value of benzene received when determining the assessable value, although it was disclosed during retail sales. The Court found that the authorities acted within the law by initiating proceedings to recover the duty upon discovering the omission during an audit. The Tribunal remitted the penalty assessment to the Commissioner for reconsideration. Ultimately, the Court concluded that no substantial legal question arose in the appeal and dismissed it, without awarding costs.

In conclusion, the High Court upheld the imposition of penalty under Section 11AC of the Central Excise Act, 1944 for duty short-paid after 28th September, 1996. The Court found that the authorities acted lawfully in initiating proceedings to recover the underpaid duty upon discovering the omission in the assessable value calculation. The Tribunal's decision to remit the penalty assessment for redetermination by the Commissioner was deemed appropriate, and no substantial legal issues were found to warrant interference. Therefore, the appeal was dismissed without costs.