2014 (3) TMI 277 - AT - Central Excise

Duty demand - Penalty u/s 11AC - Commissioner (Appeals) reduced penalty from equal amount of duty - During the period from October, 1997 to November, 1997 the manufacturer has cleared 1585 MTs of sugar on loan basis to M/s. Food Corporation of India (FCI) - The free sale sugar was cleared by discharging the duty liability, as the rate applicable to levy of sugar - Government of India vide order dated 29-11-1999 decided to treat the entire loan quantity of sugar as free sale sugar and reimbursed the price difference between the levy of sugar and Free Sale Sugar - the appellants received the differential amount in the month of November, 2001 - show cause notice was issued demanding duty along with interest and also proposing to impose penalty - Held that - w.e.f. the 11-5-2001 the provisions of Section 11AB of the Central Excise Act were amended and the provisions of Section 11AB was made applicable in all situations wherever there was a short levy or short payment, etc., of duty. In view of this the applicants are liable to pay interest w.e.f. 11-5-2001 till the payment of differential duty. In respect of penalty the manufacturer is clearing sugar as per the directions to the Food Corporation of India as per the director of Government of India decided that the Free Sale Sugar which was cleared on loan basis as levy sugar to the Free Sale Sugar and subsequently decided reimbursed the differential duty treating the same as Free Sale Sugar - it is not a case for imposition of any penalty. In view of this the penalty imposed under Section 11AC of Central Excise Act, is set aside - Decided partly in favour of assessee.

Summary

Issues:
1. Appeal against demand and penalty under Section 11AC of the Central Excise Act.
2. Challenge regarding the imposition of penalty by the Revenue.
3. Applicability of interest under Section 11B and Section 11AB of the Central Excise Act.
4. Consideration of intention to evade payment of duty by the manufacturer.
5. Reimbursement of differential duty by the Government of India.
6. Clearance of Free Sale Sugar against the quota of levy sugar.

Analysis:

1. The appellant filed an appeal against the impugned order upholding a demand of Rs. 5,23,182/- and imposing a penalty of Rs. 2,00,000 under Section 11AC of the Central Excise Act. The Revenue also filed an appeal challenging the reduction of penalty to Rs. 2,00,000 from an equal amount of duty. The Tribunal initially dismissed the Revenue's appeal, but the matter was remanded by the Hon'ble Bombay High Court to reconsider the imposition of the penalty afresh.

2. The brief facts of the case involve the appellant, engaged in sugar manufacturing, clearing sugar on loan basis to M/s. Food Corporation of India due to the unavailability of levy sugar quota. The Government of India later treated the loan quantity as Free Sale Sugar, reimbursed the price difference, and directed the payment of excise duty on the sugar at the Free Sale Sugar rate. A show cause notice was issued demanding duty, interest, and proposing a penalty, which was confirmed by the adjudicating authority and upheld by the Commissioner (Appeals) with a reduction in penalty.

3. The appellant's contention was that the differential duty was paid upon receiving intimation of reimbursement from the Government, indicating no intention to evade duty. The Revenue argued that interest under Section 11B and Section 11AB of the Central Excise Act was applicable from the date of clearance to the date of duty payment, citing amendments in the law.

4. Regarding the penalty, the Revenue claimed that the appellant did not inform about the clearance of levy sugar and intended to evade duty by charging Free Sale Sugar rates. However, the Tribunal found merit in the appellant's argument that there was no intention to evade payment, considering the circumstances of clearing sugar as per government directions and subsequent reimbursement of differential duty as Free Sale Sugar.

5. The Tribunal held that interest was payable from the date of clearance to the date of payment of duty due to the amendments in Section 11B and Section 11AB of the Central Excise Act. In the case of penalty, the imposition under Section 11AC was set aside, and the appeal by the appellant was allowed, while the Revenue's appeal was dismissed.

6. In conclusion, the Tribunal's decision favored the appellant, emphasizing the circumstances of clearing sugar as directed by the government and the subsequent treatment of the loan quantity as Free Sale Sugar, leading to the reimbursement of the differential duty and the absence of intent to evade duty payment.

This detailed analysis covers the issues involved in the legal judgment, providing a comprehensive understanding of the case and the Tribunal's decision.