2014 (11) TMI 244 - AT - Central Excise

Penalty u/s 11AC - option of avail benefit of reduced penalty of 25% - Clearance of goods without payment of duty duty paid before SCN issued - Held that - While the duty demand confirmed against the appellant is ₹ 2,71,144/-, earlier in the first round of litigation, in pursuance of the Tribunal s stay order dated 13/07/2000, they had deposited an amount of ₹ 6,00,000/- under TR-6 challan No. 30 dated 02/09/2000 and it is not disputed that this amount is still with the Department. The denovo adjudication order was passed on 31/12/2000. Thus, even before the adjudication, the entire amount of duty and interest had been paid by the appellant. The denovo adjudication order, in spite of the proviso to Section 11AC, did not give an option to the appellant to avail of the benefit of lower penalty by paying 25% of the penalty within period of 30 days of the adjudication order. In view of these facts, in our view, the judgment of Hon ble Delhi High Court in the case of K.P. Pouches (P) Ltd. vs. Union of India (2008 (1) TMI 296 - HIGH COURT OF DELHI) would be applicable and therefore the benefit of lower penalty in terms to proviso to Section 11AC cannot be denied. The penalty on the appellant under Section 11AC is accordingly reduced to 25% - Decided partly in favour of assesee.

Issues:
1. Inclusion of amortized value of moulds and dies in assessable value.
2. Demand of duty, interest, and penalty under Section 11AB and 11AC.
3. Denial of benefit of lower penalty under proviso to Section 11AC.
4. Application of judgment of Hon'ble Delhi High Court in K.P. Pouches (P) Ltd. vs. Union of India.

Analysis:
1. The appellant, a manufacturer of plastic moulded parts, was issued a show cause notice for not including the amortized value of moulds and dies in the assessable value of the parts manufactured during the period of 1996-1997 to 03/11/98. The Commissioner confirmed the duty demand of Rs. 18,36,344 along with interest under Section 11AB and imposed a penalty under Section 11AC. The Tribunal remanded the matter twice for denovo decision, instructing the Commissioner to determine the amortized value afresh. The Commissioner, in the denovo proceedings, confirmed a reduced duty demand of Rs. 2,71,144 along with interest and imposed a penalty of equal amount under Section 11AC, leading to the current appeal.

2. During the hearing, the appellant's counsel argued that since they had deposited Rs. 6,00,000 representing the duty demand and interest under a previous stay order, the benefit of lower penalty under the proviso to Section 11AC should apply. The counsel relied on a judgment of the Hon'ble Delhi High Court in K.P. Pouches (P) Ltd. vs. Union of India. The Joint CDR defended the impugned order. The Tribunal considered the submissions and records, noting that the duty demand was not disputed, and the only contention was regarding the penalty.

3. The Tribunal found that the entire duty along with interest had been paid by the appellant before the denovo adjudication. Despite this, the denovo order did not provide an option to avail the benefit of lower penalty by paying 25% of the penalty within 30 days, as per the proviso to Section 11AC. Citing the judgment in K.P. Pouches (P) Ltd. vs. Union of India, the Tribunal concluded that the benefit of lower penalty cannot be denied. Consequently, the penalty under Section 11AC was reduced to 25%, modifying the impugned order to that extent, and the appeal was partly allowed.

Conclusion:
The Tribunal upheld the duty demand based on the inclusion of amortized cost of dies and moulds in the assessable value of the plastic molded components. However, it reduced the penalty imposed on the appellant to 25% under Section 11AC, following the judgment of the Hon'ble Delhi High Court in K.P. Pouches (P) Ltd. vs. Union of India.

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