2012 (8) TMI 758 - AT - Central Excise

Penalty u/s 11AC - common inputs used for manufacture of dutiable as well as exempted goods - alleged non-payment of duty as per the provisions of Rule 57CC of the Central Excise Rules, 1944 - assessee contended that High Court had set aside demand with reference to the longer period available under the proviso to Section 11A(1) - Held that - In present case, demand has been raised beyond the normal period of 6 months provided under the provisions of Section 11A at the material time. Now, since the demand itself does not survive, the penalty is not warranted. Order set aside and the Appeal of assessee is allowed.

Summary

Issues:
1. Challenge against demand and penalty imposed for non-payment of duty on common inputs.
2. Appeal against the Order-in-Appeal upholding the lower Adjudicating Authority's decision.
3. Contention regarding sustainability of demand and penalty in light of High Court's order.
4. Consideration of the period involved and applicability of Section 11A of the Central Excise Act, 1944.
5. Decision on penalty based on the High Court's order setting aside the demand.

Analysis:
The case involved an appeal against an Order-in-Appeal upholding the lower Adjudicating Authority's decision regarding the demand and penalty imposed on the Appellant for non-payment of duty on common inputs used for manufacturing dutiable and exempted goods. The Appellant, engaged in manufacturing plastic pipes and fittings, as well as hand pumps, faced proceedings for not paying duty as per Rule 57CC of the Central Excise Rules, 1944. The lower Adjudicating Authority confirmed a demand of Rs.4,02,801/- along with an equal penalty under Section 11AC of the Central Excise Act, 1944. The Appellant challenged this decision before the learned Commissioner (Appeals), who upheld the lower Authority's order, leading to the present appeal before the Tribunal.

The Tribunal upheld the duty demand but set aside the penalty. Subsequently, the Appellant filed a Writ Petition challenging the duty levy, while the Department filed an SLP before the Supreme Court against the penalty decision. The Supreme Court directed the Tribunal to reconsider the penalty issue in light of a specific case law. The Advocate for the Appellant argued that since the demand itself was deemed unsustainable by the High Court, the penalty should not be imposed. The Department accepted the High Court's decision.

Upon careful consideration, the Tribunal noted that the demand was raised beyond the normal six-month period specified under Section 11A of the Central Excise Act, 1944. Citing the High Court's order setting aside the demand, the Tribunal concluded that since the demand did not survive, the penalty was not warranted. Therefore, the Commissioner (Appeals) order was deemed unsustainable and set aside, allowing the appeal. The Tribunal's decision was based on the High Court's ruling and the inapplicability of the longer demand period specified under Section 11A(1) of the Act.

In conclusion, the Tribunal's decision focused on the sustainability of the demand and penalty in light of the High Court's ruling, emphasizing that the penalty was not justified due to the non-survival of the demand beyond the normal statutory period specified under the Central Excise Act, 1944.