2012 (6) TMI 695 - AT - Central Excise

Differential duty demand assessee contested the denial clause in the impugned Notification No.11/96 under the deemed credit scheme has no applicability and the imposition of penalty under Rule 57I is not appropriate Held that - Since the appellants are willing to accept the differential value and make duty payment accordingly in such a case it would be unfair to deny the deemed credit totally applying the denial clause in the impugned notification which is meant for cases where a case of fraud collusion etc. is established - No willful misstatement or suppression found the impugned order-in-appeal is modified to allow the deemed credit and set aside the penalty of Rs.5000/- imposed in favour of assessee.

Summary

Issues:
1. Assessment of duty liability based on fabric values from different manufacturers and dealers.
2. Denial of deemed credit and imposition of penalty under Rule 57I.
3. Appeal against differential duty demand and penalties.

Analysis:
1. The case involved a dispute regarding the assessment of duty liability for fabrics received from various manufacturers and dealers, including M/s. Ashoka Distributors, by M/s. Pioneer Processing. The department questioned the value of fabrics received from M/s. Ashoka Distributors, leading to a differential duty demand, which M/s. Pioneer Processing accepted. However, the denial of deemed credit and imposition of penalty under Rule 57I were contested. The consultant argued that there was no evidence of fraud or collusion, and M/s. Pioneer Processing was willing to pay the differential duty based on the department's calculated average value.

2. The Tribunal considered that there was no established fraud or collusion in the case. While the department had not proven misstatement or suppression of value, they had calculated the differential duty based on adopting an average value for similar fabrics. The Tribunal found it unreasonable to deny deemed credit entirely under the impugned notification, which is typically reserved for cases involving fraud or collusion. The Tribunal also highlighted the illogical nature of a manufacturer suppressing value to gain a duty benefit while risking losing a higher credit amount. Consequently, the Tribunal upheld the duty demand and reduced penalties, modifying the impugned order to allow deemed credit for M/s. Pioneer Processing and setting aside the penalty imposed under Rule 57I.

3. Ultimately, the Tribunal dismissed one appeal and partly allowed another, specifying the terms of the decision. The judgment emphasized the absence of fraud or collusion, the willingness of M/s. Pioneer Processing to pay the differential duty, and the unfairness of denying deemed credit in this context. By considering these factors, the Tribunal made a decision that balanced duty liability assessment with fairness and logic, ensuring that penalties were reasonable and appropriate in the circumstances.