2011 (1) TMI 224 - AT - Central Excise

SSI exemption - Show-cause notice was issued stating that the extra amounts collected are extra commercial consideration for the sale of the goods and that the assessees have suppressed the facts in order to evade duty - abatement granted was to the tune of Rs. 500/- PMT towards freight and Rs. 100/- PMT towards handling charges for sale of cement Revenue contend that Rs. 500/- PMT towards freight and Rs. 100/- PMT towards handling charges as an obvious mistake and it should be read as Rs. 500/- per load and Rs. 100/- per load towards freight and handling charges - assessees fall within the ceiling limit prescribed in the notification SSI exemption allowed.

Summary

Issues involved:
- Applicability of SSI exemption to manufacturers of ordinary portland cement
- Allegations of duty evasion due to extra amounts collected towards freight and handling charges
- Imposition of penalty under Section 11AC of the Central Excise Act, 1944

1. Applicability of SSI exemption:
The case involved manufacturers of ordinary portland cement availing the Small Scale Industries (SSI) exemption. The officers found that the assesses had collected extra amounts for freight and handling charges, leading to a show-cause notice alleging duty evasion. The abatement granted for freight and handling charges was crucial in determining if the assesses fell within the ceiling limit prescribed under the SSI exemption Notification at the relevant time. The contention regarding the abatement being a mistake and should be read differently was dismissed. The Tribunal concluded that based on the figures in the notice and orders, the assesses were within the prescribed limit, leading to the demand being rightly set aside by the lower appellate authority.

2. Allegations of duty evasion:
The officers alleged that the extra amounts collected by the assesses towards freight and handling charges were extra commercial considerations for the sale of goods, constituting duty evasion. A show-cause notice was issued proposing recovery of differential duty and penal action under Section 11AC of the Central Excise Act, 1944. The adjudicating authority confirmed the demand and imposed a penalty equal to the duty amount. However, the Commissioner (Appeals) set aside the demand, leading to the Revenue filing an appeal. The Tribunal, after considering arguments from both sides, upheld the lower appellate authority's decision, stating that the assesses fell within the ceiling limit prescribed in the notification, thereby rejecting the appeal by the Revenue.

3. Imposition of penalty under Section 11AC:
The penalty imposed on the assesses was under Section 11AC of the Central Excise Act, 1944 read with Rule 173Q of the Central Excise Rules, 1944. The penalty was equal to the duty amount demanded. Despite the initial confirmation of the demand and penalty by the adjudicating authority, the Commissioner (Appeals) set aside the demand. The Tribunal's decision to uphold the lower appellate authority's order also resulted in rejecting the imposition of penalty under Section 11AC.