2016 (9) TMI 1415 - AT - Central Excise

Penalty u/s 1AC of the CEA, 1944 - it was alleged that appellant has been clearing the manufactured goods, such as GSM/GPRS modems without payment of excise duty for demonstration purpose to Uttarakhand unit - intent to evade or not? - Held that - The non-maintenance of records while clearing the goods out of the factory, is a strong indication of suppression of facts with intention to evade payment of duty. The appellants have also not disclosed such removals in any of their statutory records or in the ER-1 Returns - the explanation that the goods were removed for demonstration purpose and without intent to evade payment of duty is not tenable - the ingredient required for invoking the penal provisions u/s. 11AC of Central Excise Act, 1944 are established - penalty upheld - appeal dismissed - decided against appellant.

Summary

Issues:
Imposition of penalty under Section 11AC of the Central Excise Act, 1944 for non-payment of duty on goods cleared for demonstration purpose.

Analysis:
The case involved the appellants, engaged in manufacturing Hand Held Computers and GSM/GPRS modems, facing penalty under Section 11AC of the Central Excise Act, 1944. The investigation revealed that the appellants cleared goods without paying excise duty for demonstration purposes to another unit. The appellants calculated the duty liability, paid the duty, interest, and a 1% penalty voluntarily, requesting a waiver of show cause notice issuance. However, a notice was still issued, leading to the confirmation of duty demand, interest, and a penalty by the adjudicating authority, upheld by the Commissioner (Appeals) and challenged before the Tribunal.

The appellant contended that the goods were cleared for demonstration only, expecting them to be returned, thus no duty was paid initially. They argued against the penalty, stating they paid the duty before the notice, and it was not a case of clandestine clearance. On the other hand, the department argued that the appellants cleared goods without paying duty, highlighting the lack of records for such clearances and the intent to evade duty. They emphasized the duty payment for the period and the necessity of penalty under Section 11AC.

The Tribunal considered both sides' arguments and upheld the penalty under Section 11AC. It rejected the appellant's explanation, stating that even for demonstration purposes, proper records should have been maintained. The Tribunal found the lack of records, non-disclosure in statutory returns, and suppression of facts as indicators of intent to evade duty. It concluded that the appellants, being manufacturers, should have maintained records and their plea of ignorance of law was not acceptable. The Tribunal found the ingredients for invoking the penal provisions under Section 11AC established, thus sustaining the penalty and dismissing the appeal.