2014 (9) TMI 562 - HC - Central Excise

Imposition of penalty - Invocation of extended period of limitation - Held that - Respondent is engaged in manufacture of Galvanized Transmission Towers and parts thereof falling under Chapter 7308 of the Central Excise Tariff Act, 1985. The Officers of the Preventive Unit pointed out that the Respondents cleared these goods and parts thereof with remarks on the invoices and which demonstrate that they are exempted from payment of excise duty. The notification in that behalf has been referred by the Commissioner (Appeals) in paragraph 2 of his order. He has also adverted to the cause shown by the Assessee. Eventually after analyzing the entire material the Commissioner (Appeals) concluded that the Assessee acted bonafide on the advice/ purchase order of the customer and availed the exemption. When it was pointed out later on that the condition No.64 of the Notification is not fulfilled and the exemption is not available to the Assessee, the Assessee paid the amount of duty leviable together with interest thereon. There was nothing on record about any ingredients, namely, fraud, collusion or any willful misstatement or suppression of facts, etc. so as to enable the Revenue to impose the penalty and therefore, the Commissioner (Appeals) has set aside the penalty. No substantial question of law arises for consideration from such concurrent findings - Decided against Revenue.

Summary

Issues:
1. Whether the imposition of penalty under Section 11AB of the Central Excise Act, 1944 on the Respondent/Assessee is justified.
2. Interpretation of subsection (4) of Section 11A regarding the conditions required for the issuance of a notice for non-payment of excise duty.
3. Assessment of the Commissioner (Appeals) and the Tribunal's decisions on the applicability of penalty in the absence of evidence of fraud, collusion, or willful misstatement.

Analysis:

1. The Appeal raised a substantial question of law regarding the imposition of a penalty of Rs. 4,83,490/- on the Respondent/Assessee under Section 11AB of the Central Excise Act, 1944. The Appellant argued that invoking the extended period under subsection (4) of Section 11A does not require separate proof of ingredients for imposing the penalty. However, the Court disagreed, emphasizing that for the imposition of a penalty, elements such as fraud, collusion, willful misstatement, or suppression of facts must be proven. In this case, since there was no evidence of such elements, the penalty was rightly set aside by the Commissioner (Appeals) and the Tribunal.

2. Subsection (4) of Section 11A allows the issuance of a notice if excise duty has not been paid due to fraud, collusion, willful misstatement, or contravention of the Act with intent to evade payment. The contravention must be by a person chargeable with the duty, and the notice can be served within five years from the relevant date. The Court highlighted the importance of proving these elements before imposing a penalty equivalent to the duty specified in the notice.

3. The Respondent, engaged in manufacturing Galvanized Transmission Towers, cleared goods with exemptions from excise duty based on advice from the customer. When it was later discovered that the exemption conditions were not met, the duty was paid along with interest. The Commissioner (Appeals) found the Assessee acted in good faith and set aside the penalty due to the lack of evidence of fraud or willful misstatement. The Court upheld the decisions of the Commissioner (Appeals) and the Tribunal, stating that without proof of fraudulent intent or contravention, the imposition of a penalty is unwarranted. Consequently, the Appeal was dismissed as lacking merit.