2012 (9) TMI 706 - HC - Central Excise

Invocation of the provisions of Section 11AC of the Act and Rule 25 of the Rules Held that - Requirements of Section 11AC of the Act are required to be satisfied, namely that the default should be occasioned by reason of fraud, collusion or any wilful misstatement or suppression of facts, or the contravention of any of the provisions of the Act or Rules should be with the intent to evade payment of duty. Unless, the said basic ingredients are satisfied, the question of invoking either Section 11AC of the Act or Rule 25 of the Rules would not arise - in the absence of any such finding having been recorded by the adjudicating authority, the question of imposing penalty under Section 11AC of the Act and Rule 25 of the Rules would not arise

Summary

Issues:
- Appeal by Revenue under Section 35(G) of the Central Excise Act, 1944 against the Order of the Tribunal.
- Determination of differential duty on goods cleared through consignment agents.
- Imposition of penalty under Rule 25 of the Central Excise Rules, 2002.

Analysis:
1. The appeal by the Revenue was made under Section 35(G) of the Central Excise Act, 1944 against the Tribunal's Order, which rejected the Revenue's appeal against the Commissioner's order. The case involved a manufacturer of HR tubes/pipes who cleared goods to consignment agents, leading to a dispute over the determination of value for duty payment. The Revenue issued a show cause notice for payment of differential duty, interest, and penalties, alleging undervaluation by the respondent. The respondent denied any intent to evade duty.

2. The Commissioner of Customs & Central Excise demanded differential duty, ordered appropriation of payment made under protest, imposed interest, and a penalty on the respondent. The respondent appealed, and the Appellate Authority, citing the Hindustan Steels Ltd. case, found no suppression of facts by the assessee and declined to impose equal penalty under Section 11AC. The Commissioner's penalty under Rule 25 was also questioned for lack of reasoning.

3. The Tribunal upheld the Appellate Authority's decision, leading to a further analysis of Rule 25 of the Central Excise Rules, 2002. The Rule is subject to Section 11AC of the Act, which requires elements like fraud, collusion, or wilful misstatement for penalty imposition. The Tribunal correctly interpreted that penalty under Rule 25 is conditioned by Section 11AC. The Gujarat High Court's decision in Commissioner of Central Excise v. Tripura Containers Pvt. Ltd. supported this interpretation.

4. The Tribunal's decision was affirmed, stating that no substantial question of law arose for consideration in the Revenue's appeal, which was dismissed at the admission stage. The judgment emphasized the necessity of meeting the requirements of fraud or contravention for penalty imposition under Rule 25 or Section 11AC.