2010 (7) TMI 956 - AT - Customs

Summary

Issues Involved:
1. Penalty under Section 11AC of the Central Excise Act.
2. Interest on differential duty under Section 11AB of the Central Excise Act.
3. Reduction of penalties under Rules 209 and 210 of the Central Excise Rules, 1944.

Detailed Analysis:

1. Penalty under Section 11AC of the Central Excise Act:
The appellant, a 100% Export Oriented Unit (EOU), was found to have used imported raw materials in the manufacture of goods cleared to the Domestic Tariff Area (DTA) while claiming benefits under Notifications 8/97-C.E. and 13/98-C.E., which required the use of only indigenously procured raw materials. The adjudicating authority found that the appellant had suppressed this fact with intent to evade duty and imposed a penalty under Section 11AC. The Tribunal affirmed the demand of duty but vacated the penalties and interest, which was challenged by the Revenue and remanded by the High Court for reconsideration.

Upon reconsideration, the Tribunal held that the appellant had indeed suppressed and misdeclared facts with intent to evade payment of duty. The Tribunal referenced the Supreme Court's judgments in UOI v. Dharamendra Textiles Processors and UOI v. Rajasthan Spinning & Weaving Mills, which mandated penalties under Section 11AC when intent to evade duty was established. Consequently, the Tribunal imposed a penalty equal to the amount of differential duty.

2. Interest on Differential Duty under Section 11AB of the Central Excise Act:
The Tribunal was directed by the High Court to reconsider the interest-related issue under Section 11AB. The appellant argued that they had no intent to evade duty as the declarations were countersigned by the proper officer of Customs. However, the Tribunal found no evidence that the relevant fact of using imported raw materials was disclosed to the department before the investigation. The Tribunal concluded that the appellant's intent to evade duty was evident from the misdeclarations in the invoices. Therefore, the Tribunal held that the appellant was liable to pay interest on the differential duty for the period of delay in payment.

3. Reduction of Penalties under Rules 209 and 210 of the Central Excise Rules, 1944:
The original adjudicating authority had imposed separate penalties of Rs. 25,000/- and Rs. 5,000/- under Rules 209 and 210, respectively. The Commissioner (Appeals) had reduced these penalties, but the Tribunal found no valid reason for imposing any penalties under these rules. Therefore, the Tribunal granted relief against these penalties.

Conclusion:
The Tribunal upheld the demand of differential duty and imposed a penalty equal to the duty under Section 11AC, along with interest under Section 11AB. However, the penalties under Rules 209 and 210 were vacated. The appeal was disposed of with these modifications.