2011 (3) TMI 491 - AT - Central Excise

Penalty - Mandatory penalty - As the assessee themselves have paid the duty and came forward to inform the department, the ingredients for imposing mandatory penalty under Section 11AC are absent as there is no fraud, collusion, willful mis-statement, suppression of facts or contravention of provisions Act or Rules with an intent to evade payment of duty - Therefore, in the light of the judgment of the Hon ble apex court in the case of Union of India v. Rajasthan Spinning & Weaving Mills 2009 -TMI - 33419 - SUPREME COURT OF INDIA , no penalty is imposable on the assessee.

Summary

Issues:
Reduction of penalty by Commissioner (Appeals), Appeal by Revenue against reduction of mandatory penalty under Section 11AC, Appeal by assessee against imposition of penalty, Consideration of rectification of mistake by assessee, Imposition of penalty under Section 11AC, Adjudication of penalty by lower appellate authority, Appeal before Appellate Tribunal, Rejection of appeal by Tribunal previously, Remand by High Court, Consideration of law laid down by Hon'ble apex court, Absence of ingredients for imposing penalty under Section 11AC, Compliance by assessee in paying differential duty and interest, Intent to evade payment of duty.

Detailed Analysis:

1. The judgment involves appeals by both the assessee and the Revenue against an order where the penalty was reduced by the Commissioner (Appeals) from Rs. 9,31,339 to Rs. 2 lakhs. The Revenue appeals against the reduction of mandatory penalty under Section 11AC, while the assessee appeals against the imposition of any penalty at all.

2. The facts of the case revolve around the assessee, a manufacturer of lubricating oils, availing CENVAT credit facility on inputs. The assessee cleared plastic containers and caps to another manufacturing unit without paying duty on the correct assessable value as per the Central Excise (Valuation) Rules, 2000. The assessee later voluntarily paid the differential duty and informed the department of the mistake.

3. The department issued a show cause notice for demand of interest and imposition of penalty under Section 11AC and Central Excise Rules. The adjudicating authority confirmed the demand, interest, and imposed a penalty equal to duty. The lower appellate authority then reduced the penalty to Rs. 2 lakhs, leading to appeals before the Appellate Tribunal.

4. Previously, the Tribunal rejected the department's appeal and allowed the assessee's appeal. However, the Revenue appealed to the High Court, which remanded the matter back to the Tribunal to consider the law laid down by the apex court in a specific case.

5. The Tribunal noted that the assessee promptly rectified the mistake by paying the duty and interest upon realization of the error, followed by informing the department. Citing the apex court's decision, the Tribunal emphasized that mandatory penalty under Section 11AC is applicable only in cases involving fraud, collusion, willful misstatement, suppression of facts, or contravention of provisions with intent to evade duty payment.

6. As the ingredients for imposing penalty under Section 11AC were absent in the present case due to the assessee's compliance and lack of fraudulent intent, the Tribunal set aside the penalty imposed. Consequently, the appeal by the assessee was allowed, and the Revenue's appeal was rejected. Cross objections were also disposed of accordingly.