2011 (7) TMI 907 - AT - Central Excise

Penalty - Clandestine clearance - extended period of limitation - learned SDR submits that, as the appellant suppressed a material fact with intent to evade payment of duty, they are liable to pay interest on duty under Section 11AB and penalty under Section 11AC - It would, therefore, appear that Section 11AC is not a provision exclusively applicable to cases in which the proviso to Section 11A(1) is invoked - If the provisions of Section 11AC and the ruling of the apex court are understood differently, it can have the effect of permitting deliberate defaulters of duty to escape penal liability by virtue of the fact that payment of duty was evaded within the normal period - Decided against the assessee

Summary

Issues:
- Demand of duty and penalty under Section 11A(2) and Section 11AC of the Central Excise Act
- Allegation of suppression of facts with intent to evade payment of duty
- Appellant's challenge against rejection of affidavit and delay in submission
- Applicability of interest under Section 11AB and penalty under Section 11AC
- Interpretation of legal provisions regarding penalty imposition

Analysis:

The appeal before the Appellate Tribunal concerned the demand of duty and penalty against the Executive Engineer of a pump house. The original authority confirmed the duty demand of Rs. 13,93,019/- and an equal penalty under Section 11A(2) and Section 11AC of the Central Excise Act for the period from February 1998 to September 2000. The appellant was accused of suppressing material facts to evade duty payment, leading to the extended period of limitation being invoked. The Commissioner (Appeals) upheld the order of adjudication, prompting the appellant to file the present appeal against the appellate Commissioner's decision.

The impugned demand of duty was based on the shortage of 88 MS pipes in the factory's stock, as revealed during a visit by Central Excise officers. The appellant admitted to the clearance of these pipes without payment of duty due to lack of funds. The show-cause notice relied on statements and statutory records to allege suppression of clearance with intent to evade duty, justifying the extended limitation period and penalty imposition. The appellant contested the rejection of an affidavit claiming that 47 out of 88 pipes were still in their premises. However, the Commissioner (Appeals) found no merit in this claim due to a delay in submission and lack of supporting evidence, leading to the upheld duty demand and penalties.

Regarding interest and penalty, the Revenue argued for their imposition due to the appellant's suppression of facts. Citing Supreme Court judgments, the Revenue contended that penalty equal to duty was mandatory in cases of suppression. The SDR emphasized that mens rea could justify penalty imposition even within the normal limitation period. The Tribunal agreed with the legal proposition, stating that Section 11AC could apply irrespective of the limitation period if grounds for penalty were established. Consequently, the appeal against the demand of duty, interest, and penalty was dismissed, affirming the obligation to pay the entire duty amount, interest, and penalty under Sections 11A(2), 11AB, and 11AC, respectively.

In conclusion, the Tribunal upheld the duty demand and penalties, emphasizing the importance of establishing grounds for penalty imposition under Section 11AC. The legal interpretation allowed for penalty imposition even within the normal limitation period if suppression of facts with intent to evade duty was proven, as clarified by relevant Supreme Court judgments. The appellant's appeal was dismissed, affirming the duty, interest, and penalty liabilities as determined by the lower authorities.