2014 (9) TMI 841 - AT - Central Excise

Levy of Mandatory penalty or not - Violation of provisions of Sections 11AC and 11AB - Held that - Admittedly, in this case goods had been cleared in the month of September, 2004 and duty liability arose by the end of September, 2004. Moreover, the goods had been cleared through delivery challans and the weighment slips were duly recorded in their records, therefore the provisions of Section 11AC of the Act, i.e. fraud, collusion, wilful misstatement, suppression of facts and contravention of the provisions of the Act/Rules with intent to evade payment of duty, are not attracted. Therefore, mandatory penalty for these acts is not leviable. Further, I find that a penalty is proposed to be imposed on shortages of inputs. I find that the respondent had purchased 11,004 MT in a period of six months and there is a negligible shortage of 29 MT in their inputs and that may occur due to the weighment of inputs on various weighment machines. In these circumstances, it cannot be held that the respondent had cleared the inputs clandestinely and no evidence has been produced by the Revenue to this effect. In these circumstances, the provisions of Section 11AC of the Act are not attracted, therefore mandatory penalty is not leviable - As the respondent has paid the duty within the same month, therefore interest is not leviable - Decided against Revenue.

Summary

Issues:
1. Appeal against dropping penalty and interest.
2. Allegations of duty evasion and penalty imposition.
3. Interpretation of Section 11AC of the Act.
4. Liability for interest payment.
5. Adjudication based on evidence and provisions.

Analysis:
1. The appeal was filed by the Revenue against the dropping of penalty and interest by the Commissioner (Appeals) in a case where duty was paid before the issuance of a show cause notice, leading to the question of whether penalty and interest are leviable in such circumstances.

2. The Revenue contended that the respondent's actions indicated an intent to evade duty payment, as shortages of inputs were found, and goods were cleared without payment of duty, justifying the imposition of mandatory penalty and interest under Sections 11AC and 11AB of the Act.

3. The respondent argued that goods were cleared through delivery challans due to the unavailability of the person to issue invoices, and they paid duty promptly by the end of the month, refuting the allegations of clandestine removal. The respondent also highlighted the negligible shortage in inputs, attributing it to weighment discrepancies and asserting that penalty should not be imposed.

4. The Tribunal considered the provisions of Section 11AC of the Act, which mandate penalty in cases of fraud, collusion, wilful misstatement, or suppression of facts to evade duty payment. In this case, as duty was paid promptly, and there was no evidence of fraudulent intent or contravention, the Tribunal held that mandatory penalty was not applicable.

5. Regarding interest payment, as duty was paid within the same month of clearance, the Tribunal found no basis for levying interest. The decision was also influenced by the lack of evidence supporting clandestine clearance allegations and the negligible nature of the input shortages, leading to the dismissal of the Revenue's appeal based on the confirmed conclusion of dropping interest and penalty.