2011 (5) TMI 91 - AT - Central Excise

Penalty u/s 11AC - Whether free supplied moulds shall be subject to amortisation for determining assessable value - Show cause notice for the period 1996-97 to 2000-01 - The assessee came forward to discharge its tax liability soon after the audit observations were made during 18.4.2000 to 20.04.2000 for the first period in two instalments i.e., partly on 15.2.2000 and partly on 11.7.2000 while first show cause notice was issued on 5.3.2002 - before show cause notice was issued, the assessee informed the Department about its intention on 11.6.2001 - appreciate revenue contention that the cost aspect of the goods appears to the same before and after amortisation - But The show cause notice does not demonstrate any cost analysis to show how such inference was drawn to level charge - Show cause notice fails to provide basis for defence for which there is no scope to appreciate that the assessee had manipulated assessable value - Therefore, there is no scope to doubt ill motive of the assessee at all - Accordingly, there is also no scope to penalise the assessee in respect of the show cause notice issued for the period 1996-97 to 2000-2001 . Show cause notice for the period from April 2001 to August, 2002 - There shall be concessional penalty for the second period subject to fulfilment of the conditions in section 11AC read with the decision of Hon ble High Court of Delhi in K.P. Pouches case and subject to verification of challans of deposit of the duty demand made by adjudication.

Summary

Issues:
1. Whether free supplied moulds shall be subject to amortisation for determining assessable value.
2. Time bar for adjudication in respect of the first show cause notice.
3. Imposition of penalty for the second show cause notice period.
4. Applicability of section 11A (2B) and 11AC of the Central Excise Act, 1944.

Analysis:
1. The appeals arose from common orders dealing with show cause notices proposing demands for the periods in question, focusing on whether free supplied moulds should be subject to amortisation for determining assessable value. The appellant argued that the demand in the first notice was discharged before the notice was issued, citing legal precedents supporting their position. The second notice period was contested on the grounds of confusion in the law and lack of practicality in including amortisation costs. The Department contended that assessable value should include the cost of moulds and penalized the appellant for alleged undervaluation.

2. The Tribunal found that the first show cause notice period was time-barred as the appellant had informed the authorities about amortisation before the notice was issued, and the demand had been discharged earlier. Thus, there was no scope for penalty imposition for this period. However, for the second notice period, the appellant failed to discharge the duty demand, leading to the applicability of penalty provisions under section 11AC of the Act.

3. The Tribunal considered the applicability of section 11A (2B) and 11AC of the Central Excise Act, 1944. It noted that the appellant did not qualify for immunity under 11A (2B) for the second notice period due to non-payment of duty demand. The Tribunal emphasized the necessity of explicitly stating penalty options in adjudication orders, citing legal precedents supporting the imposition of concessional penalties under specific conditions.

4. Consequently, the Tribunal ruled that there would be no penalty against the duty demand for the first period, while a concessional penalty would apply for the second period, subject to fulfilling the conditions outlined in section 11AC and relevant judicial decisions. The appellant was granted partial relief, and the appeal was partly allowed based on the above analysis.