2015 (2) TMI 1096 - AT - Central Excise

Levy of penalty u/s 11AC - Valuation - consignment sale - The respondent deposited the differential duty along with interest on 05/07/2006. Thereafter they were issued a show-cause notice on 31/10/2006 for imposition of penalty. - Held that - Admittedly, in the present case when the respondents were informed about the undervaluation of the goods, they deposited the differential duty along with interest. The goods were otherwise cleared by reflecting the statutory records and as such it can be safely concluded that there was no suppression, misstatement or any clandestine activity, with an intent to evade payment of duty, on the part of the respondent, so as to attract the penal provisions. - No penalty - Decided in favor of assessee.

Summary

Issues:
1. Imposition of penalty by Revenue on the respondent for short payment of duty.
2. Interpretation of Section 11AC regarding mandatory penalty provision.
3. Assessment of whether Section 11AC is invocable in the case.

Analysis:
The case involved a dispute over the imposition of a penalty by the Revenue on the respondent, who was engaged in the manufacture of sponge iron. The respondent had cleared goods to consignment agents by discharging duty on the assessable value at the factory gate price, leading to a differential duty payment issue. The Revenue contended that penalty was warranted due to the short payment of duty, citing Rule 7 of Valuation Rules, 2000. The respondent, however, deposited the differential duty along with interest upon being informed about the undervaluation of goods. The Commissioner (Appeals) relied on a High Court decision and held that no penalty was required since the duty was paid before the show-cause notice was issued.

The crux of the matter revolved around the interpretation of Section 11AC and its invocability in the case. The Appellate Tribunal noted the precedent set by the Supreme Court in the case of UOI Vs. Dharmendra Textile Processors, emphasizing that when Section 11AC is invoked, authorities do not have discretion to levy a penalty less than the mandatory provision. The Tribunal concluded that the first issue to be determined was whether Section 11AC was applicable in this scenario, followed by the assessment of the penalty quantum under the said section.

Upon evaluating the contentions of both parties, the Tribunal found that since the respondent had promptly deposited the differential duty upon notification without any intent to evade payment, there was no suppression, misstatement, or clandestine activity involved. Consequently, the Tribunal agreed with the Commissioner (Appeals) that no penalty should be levied, upholding the original adjudicating authority's decision. The Tribunal rejected the Revenue's appeal, emphasizing that the absence of any wrongful intent to evade duty negated the need for penalty imposition in this case.

In conclusion, the Tribunal's decision centered on the absence of deliberate evasion by the respondent, leading to the rejection of the Revenue's appeal for penalty imposition. The case underscored the importance of prompt duty payment upon notification and the application of Section 11AC in instances of duty discrepancies, highlighting the significance of intent in determining penalty liability.