2010 (10) TMI 987 - AT - Central Excise

Summary

Issues involved: Challenge to setting aside of penalties under Section 11AC of the Central Excise Act, 1944 and under Rule 173Q of the Central Excise Rules.

Penalty under Section 11AC:
The assessees, manufacturers of articles of plastics and parts of pumps, paid duty without including the value of materials freely supplied under Rule 57F(4) of the Central Excise Rules. The duty was paid before the show cause notice for alleged short levy of duty. The adjudicating authority confirmed the demand, imposed interest under Section 11AB, and penalties equal to the duty under Section 11AC and &8377; 10,000 under Rule 173Q. The Commissioner (Appeals) set aside both penalties, noting the assessees' lack of intent to evade duty due to a genuine belief. The Tribunal upheld the finding that penalty under Section 11AC is not sustainable due to the assessees' bona fide belief.

Penalty under Rule 173Q:
The Tribunal referred to precedents stating that the value of materials supplied free must be included in the assessable value of goods produced. The assessees acknowledged their liability and paid the amount by including the value of free supply materials in the assessable value of goods. The Tribunal distinguished a previous decision relied upon by the respondents, agreeing with the Revenue that penalty under Rule 173Q is applicable. Consequently, the Tribunal partly allowed the appeal by upholding the penalty under Rule 173Q while maintaining the setting aside of the penalty under Section 11AC.