2012 (8) TMI 4 - AT - Central Excise

Demand of duty and penalty under Section 11AC of the Act - assessee is coming to the assessable value of the goods after taking fabric job work charges alleged that merchant manufacturers suppressed the value of grey fabric, which resulted in short payment of duty by the assessee Held that - No evidence on record to show that the assessee connived with the merchant manufacturers in suppression of the price of the grey fabric. The differential duty has been paid by the merchant manufacturers as they admitted in their statements that they have suppressed the value of grey fabric. In absence of any evidence that the assessee has connived with the merchant manufacturers in suppression of the price of the grey fabric allegation of suppression with intent to evade duty is not sustainable In favor of assessee

Summary

Issues:
1. Appeal against order-in-appeal confirming demand and reducing penalty under Section 11AC of the Act.
2. Cross objections challenging demand on the ground of time bar.

Analysis:
1. The appeal was filed by the Revenue against the order-in-appeal confirming a demand of Rs.4,38,209/- and reducing the penalty under Section 11AC of the Act. The appeal specifically challenged the reduction of penalty under Section 11AC by the Commissioner (Appeals). The Revenue contended that the penalty should not have been reduced.

2. The respondent also filed cross objections challenging the demand on the basis of being time-barred. The respondent argued that the demand was not sustainable due to the time elapsed since the alleged violations occurred. The respondent relied on the case law to support their contention.

3. The case involved M/s. Shreehari Fabrics Ltd., who processed grey fabric and paid duty based on certain principles. A show cause notice was issued to demand duty from the assessee for the period 1995 to 1998, alleging that the merchant manufacturers had suppressed the value of grey fabric, leading to underpayment of duty by the assessee.

4. The respondent contended that the demand was time-barred as they had been filing price declarations based on the information provided by the merchant manufacturers. They argued that there was no evidence of connivance between the assessee and the merchant manufacturers to evade duty. The respondent cited a Supreme Court decision to support their argument.

5. The Revenue argued that the demand was justified as the cost of grey fabric was misdeclared, leading to the underpayment of duty. They asserted that the extended period for demand was applicable in this case and that the assessee was liable for penalty under Section 11AC. The Revenue relied on a Supreme Court decision to support their position.

6. Upon examination, it was found that there was no evidence of connivance between the assessee and the merchant manufacturers in suppressing the price of grey fabric. The statements of the merchant manufacturers indicated their admission of misdeclaration, and the duty differentials were paid by them. As a result, the allegation of suppression with intent to evade duty was deemed unsustainable, leading to the demand being considered time-barred.

7. The Tribunal concluded that since the allegation of suppression with intent to evade duty was not sustainable, there was no merit in the Revenue's appeal seeking imposition of penalty under Section 11AC. Consequently, the appeal filed by the Revenue was dismissed, and the cross objections were disposed of accordingly.