2015 (3) TMI 1258 - Commission - Central Excise

Immunity from fine, penalty and prosecution - Benefit of reduced penalty of 25% - Scope of section 11AC before and after amendment w.e.f. 8.4.2011 - Clandestine removal - short payment of duty - Sponge Iron in lump and fine form - Held that - out of the total duty amounting to ₹ 1,73,25,387/- accepted by the applicants, a sum of ₹ 1,07,19,305/- pertains to the period prior to 8-4-2011 and the balance amount relates to the period after 8-4-2011 when the option of paying 25% of the duty determined as penalty is no longer available. Some changes in the provisions of Section 11AC of the Act have been proposed in the Union Budget 2015, but the same are still to become law. As per sub section 8 of Section 32F of the Act, an order of settlement under Section 32F(5) has to provide for the terms of settlement including any demand by way of duty, penalty or interest and all other matters to make the settlement effective which includes consideration of grant of immunity from prosecution as provided in Section 32(K) of the Act. Immunity from prosecution without approaching the Settlement Commission is governed by the provisions of Central Excise (Compounding of Offences) Rules, 2005. As per these rules, a person is liable to pay upto 50% of the duty evaded as compounding fees to seek immunity from prosecution. The Central Excise Duty in this case is settled at ₹ 1,73,25,387/- - The applicant is liable to pay interest as per the provisions of Sections 11AB and 11AA of the Central Excise Act, 1944 - the Bench imposes penalty of ₹ 50,00,000/- (Rupees fifty lakhs only) on the applicant M/s. Maithon Steel & Power Ltd. (Unit-I) and ₹ 20,00,000/- (Rupees twenty lakhs only) each on the co-applicants, Shri Sitaram Bagaria and Shri Amit Agarwalla and grants immunity from penalty in excess of these amounts - appeal disposed off.

Summary

Issues Involved:

1. Demand and recovery of Central Excise duty.
2. Recovery of interest on unpaid duty.
3. Imposition of penalty.
4. Appropriation of the amount already paid.
5. Immunity from penalty and prosecution.

Issue-wise Detailed Analysis:

1. Demand and Recovery of Central Excise Duty:

The applicant, a manufacturer of Sponge Iron, was found to have clandestinely removed 12,526.165 M.T. of Sponge Iron without payment of Central Excise duty amounting to Rs. 1,73,25,387. The applicant admitted to the short payment of duty and deposited Rs. 1,62,70,862 towards the duty and Rs. 46,10,764 towards interest before approaching the Commission. The balance amount of Rs. 10,54,525 was not admitted as additional liability towards duty by the applicant. The Commission settled the Central Excise Duty at Rs. 1,73,25,387 and directed the jurisdictional Commissioner to appropriate the sum already deposited and for the applicant to pay the balance within 30 days.

2. Recovery of Interest on Unpaid Duty:

The applicant contended that interest liability should be calculated after adjusting the Cenvat Credit available with them. The Commission rejected this argument, stating that interest is liable to be paid when the duty is not discharged by the due date, irrespective of the availability of Cenvat Credit. The jurisdictional Commissioner was directed to calculate the interest on the total accepted duty liability of Rs. 1,73,25,387 and intimate the same to the applicant within 15 days. The applicant was to deposit the balance amount towards interest liability within 15 days from the date of intimation.

3. Imposition of Penalty:

The Department and jurisdictional Commissioner contested the acceptance of the reduced amount of duty liability and prayed for not granting immunity from penalty and prosecution. The Commission imposed a penalty of Rs. 50,00,000 on the applicant and Rs. 20,00,000 each on the co-applicants. The penalty amounts were to be paid within 30 days from the date of receipt of the order. The Commission granted immunity from penalty in excess of these amounts.

4. Appropriation of the Amount Already Paid:

The applicant had already deposited Rs. 1,62,70,862 towards duty and Rs. 46,10,764 towards interest. The Commission directed the jurisdictional Commissioner to appropriate these amounts towards the applicant's duty and interest liability.

5. Immunity from Penalty and Prosecution:

The applicants sought immunity from penalty and prosecution, claiming full and true disclosure and cooperation with the authorities. The Commission granted immunity from prosecution under the Act and Rules made thereunder, subject to the payment of the aforesaid amounts. The immunities from penalty and prosecution were granted under sub-section (1) of Section 32K of the Act, subject to the provisions contained in sub-sections (2) and (3) of Section 32K. The order of settlement would be void if obtained by fraud or misrepresentation of facts.

Conclusion:

The Commission settled the case under Section 32F(5) of the Act, directing the applicant to pay the balance duty and interest within specified periods, imposed penalties on the applicant and co-applicants, and granted immunity from prosecution subject to compliance with the settlement terms. All concerned were informed accordingly.