2006 (12) TMI 493 - AT - Central Excise

Summary

Issues involved: Appeal against penalty equal to duty demand set aside by Commissioner (Appeals).

Issue 1 - Valuation of goods under Central Excise Tariff Act, 1985:
The respondent company, having two units, manufactured HDPE bags under Chapter 39 of Central Excise Tariff Act, 1985. They transferred products from one unit to another, paying duty on intermediate products. Post a change in Central Excise Valuation Rule from 1.7.2000, duty was required on value with 15% notional profit. The company continued paying duty based on the old valuation. Upon detection, duty under new rules was paid in 2001. A show cause notice in 2004 sought to confirm duty for 01.07.2000 to 31.10.2001 with penalty. The Commissioner (Appeals) set aside the penalty, noting no intention to evade duty as goods were cleared with duty paid, albeit at an incorrect value.

Issue 2 - Allegations of short levy and intention to evade payment:
The Department argued short levy, intention to evade duty, and suppression of facts. However, the Tribunal found it to be a bona fide dispute due to ignorance of the law change from 1.7.2000. It was noted that duty paid by the first unit for inter-unit transfers was available as Cenvat credit for the recipient unit. Consequently, the Tribunal held that there was no intention to evade duty, as the discrepancy arose from a lack of awareness rather than deliberate evasion.

In conclusion, the Tribunal rejected the Department's appeal, emphasizing that the case did not involve clandestine removal but rather a genuine misunderstanding of the changed valuation rules, leading to the duty discrepancy.