2015 (3) TMI 81 - AT - Central Excise

Non payment of appropriate excise duty on the scrap generated at the job worker premises from the goods sent and processed under rule 57F (4) of Central Excise Rules, 1944 - Removal of capital goods to their job workers premises without reversal of credit - Imposition of interest and penalty - Held that - Department initiated detailed investigations on 3.3.1999 and recorded statements and detected non-payment of excise duty on scrap cleared from the job worker premises and also detected clearance of capital goods without reversal of credit during the period 1994-95 to 1998-99. The suppression of facts with deliberate intention to evade payment of duty has been clearly brought out in the findings of the adjudication order. It is evident from the records that the appellants have paid the duty only on 9.3.99 i.e. after the department detected the duty evasion. Since the suppression of facts is established beyond doubt the adjudicating authority has rightly invoked Section 11AC and Section 11AB for imposition of penalty and the interest and rightly restricted the penalty under Section 11AC and interest under Section 11AB only on the demand amount covered for the period from 28.9.1996. As held by the apex court in the case of UOI Vs Dharmendra Textile Processors once mens rea with intention to evade payment of duty is established, appellants are liable for mandatory penalty and interest under Section 11AB. - Following decision of Arun Vyapar Udyog Pvt. Ltd. 2013 (12) TMI 817 - MADRAS HIGH COURT - demands confirmed by the Lower Authority is liable to be upheld and the appellants are liable for penalty under Section 11AC and liable for interest under Section 11AB and under Rule 57 U (6) and Rule 57U (8) of CER prospectively for the demand amount covered from 28.9.96. Whether the amended provisions of Section 11AC of the Act for availing 25% penalty is applicable to the present case. - Held that - There is no evidence to show that payment of Section 11AB interest as well as interest demanded under Rule 57U(8) of CER and reduced penalty paid before 30 days of receipt of adjudication order. Therefore, the adjudicating authority in the impugned order confirming the demand and imposing penalty under Section 11AC and demanding interest under Section 11AB and also under rule 57U of CER equivalent to the duty payable after 28.9.96 is sustainable. Appellants are not eligible for the reduced penalty of 25% of the duty amount. - Following decision of CCE Raigad Vs Castrol India Ltd. 2012 (6) TMI 697 - BOMBAY HIGH COURT . Impugned order imposing penalty under Section 11AC and demanding interest under Section 11AB equivalent to duty payable after 28.9.1996 and imposition of penalty under Rule 57U (6) and interest under Rule 57U (8) of CER is upheld. - However, penalty of ₹ 1,00,000/- imposed under Rule 173Q is set aside. - Decided partly in favour of assessee.

Summary

Issues Involved:
1. Non-payment of appropriate excise duty on scrap generated at job worker premises.
2. Removal of capital goods to job worker premises without reversal of credit.
3. Imposition of penalties under Section 11AC, Rule 57U, and Rule 173Q.
4. Demand of interest under Section 11AB and Rule 57U(8).
5. Eligibility for reduced penalty of 25% under Section 11AC.

Detailed Analysis:

1. Non-payment of Appropriate Excise Duty on Scrap:
The appellants, manufacturers of industrial valves, were found to have not paid appropriate excise duty on the scrap generated at the job worker premises from goods sent and processed under Rule 57F(4) of Central Excise Rules, 1944. The adjudicating authority confirmed the duty demand of Rs. 15,53,996/- under the proviso to Section 11A(1) of the Central Excise Act, appropriating the entire duty amount already paid by the appellants towards the demand.

2. Removal of Capital Goods Without Reversal of Credit:
The appellants also removed capital goods to their job worker premises without reversing the credit. The adjudicating authority confirmed the reversal of credit amounting to Rs. 1,71,091/- under Rule 57U(2) and vacated the protest of the appellant when they paid the said amount.

3. Imposition of Penalties:
The adjudicating authority imposed several penalties:
- Rs. 8,52,254/- under Section 11AC equivalent to the duty payable after 28.9.1996.
- Rs. 1,63,815/- under Rule 57U(6) for ineligible credit taken after 28.9.1996.
- Rs. 1,00,000/- under Rule 173Q of Central Excise Rules.

The Tribunal, in its earlier order, set aside the penalties under Section 11AC, Rule 57U, and Rule 173Q, as well as the interest demanded under Section 11AB and Rule 57U(8), on the grounds that no penalty can be imposed for the period prior to 28.9.1996.

4. Demand of Interest:
Interest was demanded under Section 11AB in respect of duty of Rs. 8,52,254/- and under Rule 57U(8). The adjudicating authority's imposition of interest was upheld by the Tribunal, which noted that interest is leviable on delayed or deferred payment of duty for whatever reasons, as established by the Supreme Court in CCE Vs SKF India Ltd.

5. Eligibility for Reduced Penalty of 25%:
The appellants argued that they paid 25% of the total penalty within 30 days of the High Court's order, thus complying with Section 11AC. However, the Revenue contended that the appellants were not eligible for the reduced penalty as they did not pay it within 30 days of the adjudication order. The Tribunal upheld this view, citing the Bombay High Court's decision in CCE Raigad Vs Castrol India Ltd., which emphasized strict compliance with the conditions set out in Section 11AC for availing the reduced penalty.

Conclusion:
The Tribunal upheld the adjudicating authority's order, confirming the demand of excise duty and the reversal of credit. It also upheld the imposition of penalties under Section 11AC and Rule 57U, and the demand of interest under Section 11AB and Rule 57U(8) for the period post-28.9.1996. The Tribunal set aside the penalty of Rs. 1,00,000/- under Rule 173Q, considering the penalties already imposed under Section 11AC and Rule 57U(6). The appeal was disposed of accordingly.