2009 (12) TMI 836 - AT - Central Excise

Penalty under 11 AC of the Central Excise Act read with Rule 25 of Central Excise Rules - no allegation of fraud, misstatement of facts with intent to evade payment of duty - demand of differential duty - Held that - In the present case, even in the show cause notice there is no whisper of fraud, collusion or any willful misstatement or suppression of facts with intent to evade payment of duty. In order to attract the provisions of Section 11AC it must be alleged in the show cause notice that the duty had not been levied or paid by reason of fraud, collusion or willful misstatement or suppression of facts or by reason of contravention of any provision of Act or Rules with intent to evade payment of duty - In the present case the excess duty paid and adjustment of the same was reflected in the monthly returns. Penalty not sustainable - appeal allowed - decided in favor of appellant.

Summary

Issues:
Imposition of penalty under Section 11AC of the Central Excise Act.

Analysis:
The Appellant filed an Appeal against the penalty imposed under Section 11AC of the Central Excise Act. The Appellant argued that they had paid excess duty for certain months, which was adjusted in their subsequent duty payments, as reflected in their monthly returns. The Revenue issued a show cause notice demanding differential duty and imposed a penalty under Section 11AC. The Appellant contended that there was no allegation of fraud, misstatement, or intent to evade duty in the show cause notice, as they regularly filed returns showing duty payments without suppression of facts. The Appellant relied on a Supreme Court decision in a similar case.

The Revenue's position was that the Appellants were not entitled to take credit for excess duty paid suo motu. They argued that the Appellants failed to mention the adjustment of duty in their monthly return for a specific month, indicating an intention to evade duty payment. The Revenue cited a Tribunal decision and claimed that the Appellants were liable for penalty under Section 11AC due to their failure to deposit differential duty upon request and their alleged evasion of duty payment.

The Appellant challenged the penalty under Section 11AC, which specifies penalties for non-payment or underpayment of excise duty due to fraud, collusion, misstatement, or contravention of rules with intent to evade duty payment. The Appellant referenced a Supreme Court ruling that emphasized the conditions necessary to apply Section 11AC and the lack of discretion in quantifying penalties once the section is applicable. The Court found that the show cause notice did not allege fraud, collusion, or willful misstatement to evade duty payment, and since the excess duty payment and adjustment were reflected in the monthly returns, the penalty under Section 11AC was deemed unsustainable and set aside. The Appeal was allowed, and the penalty was overturned based on the lack of evidence supporting the imposition of penalty under Section 11AC.