2012 (9) TMI 109 - HC - Central Excise

Penalty - Assessee wrote letters to the authorities - In return, the assessee did not receive any information. On the understanding that the authorities have confirmed his understanding, he did not pay the duty - when it was pointed out that the duty is payable, he paid the duty and interest promptly- Held that - assessee was in a benefit of doubt about the liability to pay duty, he was corresponding with the department and in those circumstances, it cannot be said that there is a wilful intention to avoid payment of tax penalty set aside

Summary

Issues:
Challenge to order upholding penalty imposition by Tribunal.

Analysis:
The High Court of Karnataka heard an appeal by the revenue challenging the Tribunal's decision upholding the Appellate Authority's order setting aside a penalty imposed by the Original Authority. The penalty amount in question was Rs. 87,106, equivalent to the duty payable. The assessee claimed to have a genuine doubt regarding the duty payable and was also availing Cenvat credit. The assessee had written letters to the authorities seeking clarification but did not receive any response. Believing that the authorities had confirmed his understanding, the assessee did not initially pay the duty. However, upon being informed of the duty liability, the assessee promptly paid the duty and interest. The Assessing Authority still imposed the penalty, which was later set aside by the Commissioner on the grounds that the assessee was genuinely uncertain about the duty liability, had been in correspondence with the department, and did not have a wilful intention to evade tax. The revenue then appealed to the Tribunal, which upheld the decision of the Appellate Authority.

The High Court noted that as per a Circular issued by the Central Government, no appeal lies to the High Court for claims of less than Rs. 2 lakhs, especially for penalties, when no substantial question of law is involved. The court observed that based on the evidence, there was no intention on the part of the assessee to evade tax. The assessee genuinely doubted whether duty was payable to claim Cenvat credit, corresponded with the department for clarification, and did not receive a response, leading to the belief that no duty was payable. Therefore, the court found no merit in the revenue's appeal, as it was satisfied that the assessee's actions were in good faith, and no substantial question of law arose for consideration. Consequently, the appeal was dismissed by the High Court of Karnataka.