2009 (11) TMI 747 - AT - Central Excise

Summary

Issues:
Penalty imposed under Section 11AC of the Central Excise Act; Validity of show-cause notice; Applicability of sub-section (2B) of Section 11A; Revenue neutrality principle; Imposition of penalty under Section 11AC; Demand of interest under Section 11AB.

Analysis:

The appeal was filed against a penalty imposed under Section 11AC of the Central Excise Act. The original authority confirmed a duty demand of over Rs. 15 lakhs against the assessee and imposed an equal penalty under Section 11AC. The assessee contended that no show-cause notice should have been issued as they voluntarily paid the differential duty upon discovering a valuation mistake. The appellant invoked the revenue neutrality principle to argue against the penalty. The department argued that sub-section (2B) of Section 11A did not apply due to suppression of facts by the assessee.

The Tribunal considered the challenge in the appeal. It noted that sub-section (2B) of Section 11A did not apply to the case as per sub-section (2C) of the section. The Tribunal found that the voluntary payment of duty did not exempt the assessee from the penalty. The department was within its rights to issue a show-cause notice for demanding interest under Section 11AB and imposing a penalty under Section 11AC, which was done in this case. The Tribunal did not find any valid ground to contest the demand of interest on duty.

Regarding the imposition of penalty under Section 11AC, the counsel argued that the assessee had followed Board instructions, paid duty based on assessable value, and promptly rectified any short-payment upon notification. The Tribunal agreed with the counsel's submission that no penalty under Section 11AC was warranted in this case. Consequently, the Tribunal upheld the demand of duty with interest but set aside the penalty, partially allowing the appeal.

In conclusion, the Tribunal upheld the duty demand with interest but overturned the penalty imposed under Section 11AC, citing the assessee's prompt rectification of duty discrepancies and compliance with Board instructions.