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2011 (4) TMI 1453 - HC - Central ExcisePenalty - demand with interest paid before issuance of SCN - wrongful availment of CENVAT credit - Held that - in the facts of this particular case that the Appellate Authorities committed no error in giving the benefit of waiver of penalty when the assessee had paid the duty and interest even before issue of show cause notice when the error was pointed out during the audit - decided against Revenue.
Issues:
Challenge to penalty imposed by Assessing Authority and subsequent appellate decisions. Analysis: The case involves a dispute over penalty imposed by the Assessing Authority on an assessee engaged in manufacturing acoustic enclosures for DG sets and Control Panels. The assessee purchased control panels from another entity and cleared them to a 100% EOU without paying Central Excise duty. Subsequently, the assessee misdeclared the origin of the control panels and irregularly availed Cenvat credit. Upon audit, the mistake was acknowledged, and duty and interest were paid. The Assessing Authority imposed a penalty, which was later set aside by the Commissioner of Central Excise and upheld by the Tribunal. The Revenue challenged these decisions. The Revenue contended that the assessee's actions did not constitute a bona fide mistake as they purchased finished control panels and wrongly claimed duty credit. They argued that testing, inspection, and packing do not amount to manufacturing under the Central Excise Act, thus justifying the penalty. In response, the assessee argued that they believed their actions constituted manufacturing as they had the capability to manufacture control panels and had received a 100% EOU order. They maintained that the penalty was unjustified as duty and interest were promptly paid upon discovery of the error during an audit. The High Court, after considering the arguments, found that the Appellate Authorities were correct in waiving the penalty as the duty and interest were paid before any show cause notice was issued. The Court emphasized that the case's specific circumstances warranted leniency due to the prompt rectification of the error upon audit discovery. Therefore, the Court declined to interfere with the lower authorities' decisions, citing no substantial question of law and affirming the waiver of penalty. In conclusion, the High Court upheld the decisions of the lower authorities, emphasizing the timely payment of duty and interest upon error discovery as a significant factor in waiving the penalty. The Court declined to address any substantial question of law, as the case's facts were adequately considered by the lower authorities and did not warrant interference.
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