2011 (6) TMI 479 - AT - Central Excise

Demand - Rule 173Q of Central Excise Rules 1944 - It is a case of conversion of entire quantity of levy sugar for the period from October 1997 to December 1997 on loan basis to Food Corporation of India to free sale sugar - A clear cut finding given by the Ld. Commissioner (Appeals) that penalty under Section 11AC is not warranted in the proceedings and the department failed to bring out any evidence against the respondent that there was suppression of facts etc. with intention to evade payment of duty in the case - Appeal is dismissed

Summary

Issues:
- Imposition of penalty under Section 11AC read with Rule 173Q
- Invocation of proviso to Section 11A
- Suppression of facts with intention to evade payment of duty

Imposition of Penalty under Section 11AC read with Rule 173Q:
The case involved an appeal by the Revenue against the imposition of a token penalty of Rs.10,000 by the Commissioner (Appeals) instead of the mandatory penalty under Section 11AC. The Revenue contended that since the proviso to Section 11A was invoked, the mandatory penalty under Section 11AC had to be imposed. Citing a Supreme Court decision, the Revenue argued for the imposition of the penalty. However, the Tribunal noted that the conversion of levy sugar to free sale sugar occurred without the intention to evade payment of duty. The Commissioner (Appeals) had found that the penalty under Section 11AC was not warranted due to the lack of evidence of suppression of facts. The Tribunal upheld the Commissioner's decision, stating that the case law cited by the Revenue was not applicable to the facts of the case, and since the respondent did not challenge the token penalty, there was no reason to interfere with the Commissioner's order. The appeal was dismissed.

Invocation of Proviso to Section 11A:
The Revenue argued that the proviso to Section 11A was invoked in the case, necessitating the imposition of the mandatory penalty under Section 11AC. However, the Tribunal found that while the proviso was indeed invoked, the essential elements of suppression of facts with the intention to evade payment of duty were not present in this case. The Tribunal highlighted that the Commissioner (Appeals) had specifically stated that the penalty under Section 11AC was not warranted, as there was no evidence of suppression of facts by the respondent. The Tribunal emphasized that the charge of evasion through misstatement, suppression, and fraud, as seen in the cited case law, was not established in the present case. Consequently, the Tribunal concluded that the invocation of the proviso to Section 11A did not automatically mandate the imposition of the penalty under Section 11AC.

Suppression of Facts with Intention to Evade Payment of Duty:
The Tribunal thoroughly examined whether there was suppression of facts with the intention to evade payment of duty by the respondent. It was observed that while the conversion of levy sugar to free sale sugar had occurred without the payment of the differential duty initially, the respondent rectified this error upon being notified by the Department. The Tribunal noted that the Commissioner (Appeals) had found no evidence of suppression of facts or intention to evade duty on the part of the respondent. The Tribunal concurred with the Commissioner's decision that the penalty under Section 11AC was not warranted in this case due to the absence of any proof of deliberate evasion. The Tribunal emphasized that the facts of the case did not align with the circumstances that warranted the imposition of the penalty under Section 11AC, as established in the case law cited by the Revenue.