2015 (1) TMI 584 - HC - Central Excise

Penalty u/s 11AC - Non-payment of duty on the price escalation amount received - Supplied concrete sleepers to railways under contract with price escalation clause - The price differential on account of price escalation from back date was received by the appellant in the year 1999 - Neither the duty was paid by the appellant nor the receipt of price differential was intimated to revenue - Held that - The Assessee did not inform about the clause regarding escalation of the price; the bills claiming the escalated price; and the escalated price received by the Assessee - The Assessee neither applied for the provisional assessment nor paid excise duty when the escalated bills were raised or payment was received - A part of excise duty was paid only when it was pointed out by the DGAE - findings clearly show that the Assessee wanted to evade duty. These findings have been upheld by the Tribunal. There is no illegality in these findings. In view of this it is held that the Assessee is liable to pay penalty under Section 11AC of the Act. Section 11AC was inserted in the Act with effect from 28-9-1996, that is to say that the penalty under Section 11AC of the Act could only be imposed w.e.f. 28-9-1996. In view of the same, only penalty equal to the amount of the excise duty short-paid for the period from 28-9-1996 to 31-8-1998 can be imposed. - Decided partly in favour of assessee.

Summary

Issues:
Tax appeal under Section 35(G) of the Central Excise Act, 1944 against the order partly dismissing the appeal and upholding penalty under Section 11AC for short payment of excise duty.

Detailed Analysis:

1. Facts and Background:
The appellant, a manufacturer of concrete sleepers for Railways, supplied goods with an escalation clause for price adjustment. The Directorate General of Anti-Evasion highlighted short payment of excise duty on escalated bills, leading to a show cause notice and subsequent penalty imposition.

2. Imposition of Penalty:
The Adjudicating Officer confirmed the penalty under Section 11AC of the Act, equal to the short-paid duty amount, along with an additional penalty. The Tribunal partially allowed the appeal, reducing the penalty amount.

3. Substantial Questions of Law:
The High Court considered two substantial questions of law: whether the penalty equal to the short-paid duty could be imposed when part of the duty was voluntarily paid earlier, and if the penalty under Section 11AC could be applied retrospectively.

4. Court's Decision:
The Court upheld the findings that the appellant attempted to evade duty by not disclosing price escalation details and delayed duty payment until pointed out. The Court clarified that Section 11AC could only be enforced from its insertion date in 1996, limiting the penalty to the period post its enactment.

5. Conclusion:
The Court partially allowed the appeal, holding the appellant liable to pay the penalty under Section 11AC equal to the short-paid duty amount for the period following the enactment of the provision. The judgment balanced the interests of both the Assessee and the Department, providing clarity on the application of penalties in excise duty cases.