2014 (2) TMI 568 - AT - Central Excise

Calndestine removal of goods - Intention to evade duty - Demand of differential duty - Imposition of penalty - Held that - Extended period has been invoked and has been upheld on the ground that when the goods have been cleared to the sister unit, the duty was paid only on notional value since supply has been made to the sister unit. The Commissioner (Appeals) has also observed that the advocate for the appellant could not explain whether they were following this practice all along. He has observed that the advocate could not give a proper explanation - appellant had Cenvat credit of more than Rs. 10 lakhs in their account, the differential duty demand is only Rs. 1.24 lakhs approximately. This being the position, the appellant did not gain any benefit by undervaluing the inputs. Further there is no finding that the sister unit did not take the credit of the amount for the goods were diverted by sister unit for imposition of penalty under Section 11AC of the Central Excise Act, 1944 since duty with interest has not been challenged, it is necessary for the department to establish that there was any intention to evade duty. The circumstances of the case clearly show that there could not have been intention to evade duty - Decided in favour of assessee.

Issues involved:
1. Appellants removing inputs to sister concern without reversing Cenvat credit.
2. Show cause notice for recovery of duty, interest, and penalty.
3. Appellant's submission of no intention to evade duty.
4. Departmental representative's reliance on Tribunal's decision.
5. Commissioner's observations and decision on extended period invocation.
6. Appellant's argument on not gaining benefit from undervaluing inputs.
7. Tribunal's analysis on intention to evade duty and imposition of penalty.

Analysis:
1. The case involved the appellants removing inputs to their sister concern without reversing the Cenvat credit, leading to a differential duty of Rs. 1,24,444. A show cause notice was issued for recovery, including interest and penalty.

2. The appellant argued that the removal to the sister concern was a mistake with no intention to evade duty. They promptly paid the duty amount with interest as soon as the omission was pointed out. The appellant also cited a Gujarat High Court decision supporting their stance on revenue neutrality.

3. The Departmental Representative referred to a Tribunal's decision to counter the appellant's argument, emphasizing that clearance to a sister unit and credit availability does not justify an extended period of limitation.

4. The Tribunal considered both sides' submissions and upheld the extended period invocation. The Commissioner's observations highlighted the lack of explanation from the appellant's advocate regarding their past practices. However, the Tribunal disagreed with the Commissioner's view on the intention to evade duty.

5. The Tribunal noted that the appellant had substantial Cenvat credit, far exceeding the differential duty demand. It was emphasized that the appellant did not gain any benefit from undervaluing the inputs, and there was no evidence that the sister unit did not take the credit.

6. Given the circumstances, the Tribunal found no intention to evade duty and set aside the penalty. The appeal was allowed in favor of the appellant, granting consequential relief.

This detailed analysis of the judgment highlights the key issues, arguments presented, and the Tribunal's reasoning leading to the final decision in favor of the appellant.

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