2010 (8) TMI 799 - AT - Central Excise

Summary

Issues:
1. Levy of excise duty on branded jewellery
2. Clearance of excisable goods without payment of duty
3. Contravention of Central Excise Rules
4. Discharge of duty liability by the assessee
5. Imposition of penalty under Section 11AC of the Central Excise Act, 1944
6. Penalty imposed under Rule 25 of the Central Excise Rules, 2002

Levy of Excise Duty on Branded Jewellery:
The case involved the imposition of a 2% excise duty on 'Articles of branded Jewellery' as per the Union Budget 2005-06. The appellant was found to have removed excisable goods without paying the duty from their factory premises to retail showrooms, leading to a contravention of Central Excise Rules.

Clearance of Excisable Goods Without Payment of Duty:
The appellant was accused of clearing excisable goods without correctly determining the assessable value, without paying appropriate duty, and not reflecting the clearances in the filed returns. This action was seen as an attempt to evade duty payment.

Contravention of Central Excise Rules:
The appellant was found to have contravened Rules 4, 6, 8, 11 & 12 of the Central Excise Rules, 2002 by not seeking permission for provisional assessment, undervaluing excisable goods, and not paying duty on the entire cost of gold used for making jewellery.

Discharge of Duty Liability by the Assessee:
The appellant claimed to have discharged the differential duty before the show cause notice was issued, asserting no intention to evade payment. Correspondences between the appellant and the department were highlighted to support their argument that they sought clarifications and discharged the duty liability pending clarifications.

Imposition of Penalty under Section 11AC of the Central Excise Act, 1944:
The adjudicating authority dropped the penalty under Section 11AC but imposed a penalty under Rule 25 of the Central Excise Rules, 2002. The Commissioner (Appeals) rejected the appellant's appeal and allowed the Revenue's appeal for the penalty under Section 11AC.

Penalty Imposed under Rule 25 of the Central Excise Rules, 2002:
The appellant argued against the penalty under Rule 25, claiming no intent to evade duty. The department contended that the appellant did not follow the correct procedure and should have paid duty on a provisional assessment basis.

Analysis and Decision:
The Tribunal found that the appellant had intended to discharge the duty liability, as evidenced by their correspondences seeking clarifications. The imposition of penalty under Section 11AC was deemed unwarranted due to the appellant's clear intention to pay duty. However, the penalty under Rule 25 was upheld as the appellant had not maintained proper records. The Tribunal set aside the penalty under Section 11AC but retained the penalty under Rule 25.