2010 (5) TMI 421 - AT - Central Excise

Demand and penalty short payment of duty - SCN alleging default in payment of excise duty - short payment of duty during those five months which stood paid by the assessee along with interest - SCN does not reveal the circumstances under which short payment has occurred Held that - short-payment that has occurred have not been dealt with in the show cause notice - default in payment and consequent liabilities are difficult to sustain - Rule 8(3A) cannot be invoked - order of the Commissioner (Appeals) in demanding differential duty and permitting credit of equal amount in cenvat credit account is set aside - penalty under Rule 25 of the Central Excise Rules is reduced - Appeal of the Department is rejected

Summary

Issues:
1. Department's appeal against the order of the Commissioner (Appeals).
2. Assessee's appeal against the same order of the Commissioner (Appeals).

Analysis:
1. Department's Appeal:
The Department appealed seeking restoration of the original order by setting aside the Commissioner (Appeals) decision. The Department contended that the duty paid by the party through cenvat credit could not be considered as valid payment, leading to a duty demand. The original authority confirmed the duty demand and imposed a penalty under Section 11AC of the Central Excise Act, 1944. On appeal, the Commissioner (Appeals) held that only a portion of the amount paid was irregular and ordered its recovery in cash, allowing the party to take an equal amount as credit. The penalty under Section 11AC was set aside and converted to a penalty under Rule 25 of the Central Excise Rules, 2002.

2. Assessee's Appeal:
The party appealed to set aside the confirmed demand and the penalty sustained by the Commissioner (Appeals). The Tribunal noted that the show cause notice alleged short payment of duty during a specific period, which the assessee had paid along with interest. It was observed that the show cause notice did not establish default in payment but only short payment for the mentioned period. The Tribunal held that the circumstances leading to the short payment were not addressed in the notice or subsequent orders. Therefore, the finding of default and consequent liabilities were deemed unsustainable. The Tribunal concluded that Rule 8(3A) could not be invoked in this case.

In the final judgment, the Tribunal acknowledged that there was indeed a case of short payment and non-filing of returns during the specified period. The order of the Commissioner (Appeals) demanding differential duty and allowing credit in the cenvat account was set aside. However, considering the admitted short payment and non-submission of returns, a reduced penalty under Rule 25 of the Central Excise Rules was imposed. The penalty was reduced from Rs. 40,000 to Rs. 10,000. Consequently, the Department's appeal was rejected, while the party's appeal was allowed except for sustaining the penalty of Rs. 10,000.