2015 (10) TMI 1188 - AT - Central Excise

Exemption of duty - Notification No. 10/2003-CE dated 01.03.2003 - Imposition of penalty - Held that - Appellant s product was exempted prior to 01.03.2006. They were maintaining proper records and were filing NIL returns with their jurisdictional central excise officers. Even after the withdrawal of the exemption notification, they continued to file NIL returns with the same jurisdictional authorities even though it is on record that the office of the jurisdiction was changed from S.C. Road to Vijayanagar. However, it is also a fact on record that on receipt of the ST-3 returns, officers at SC Road never returned the said returns to the appellant with direction to them to file it in the proper office. Further, the officers at SC Road accepted the said returns and never raised the issue of payment of duty. The appellant s lapses came to notice, for the first time with the visit of the audit party. The statement of their Managing Director recorded on the spot indicates that the appellant was unaware of the fact of excisability of the said product. Though, not knowing the law cannot be taken as an excuse but if overall facts are viewed i.e, the appellant s maintaining proper records, filing of proper returns, acceptance of such returns by the concerned officer, the statement of the Managing Director; the same leads to an inevitable conclusion that non-payment of duty was not as a result of any malafide intention but was a pure mistake on the part of the officer. If the departmental officers, who accepted the returns also were not aware of the levy of duty and withdrawal of exemption, the assessee, who is not a legal expert cannot be blamed for that. It is not a case of clandestine removal inasmuch as all the removals were part of the statutory records. It is well settled that provisions of Section 11AC can be invoked only in case of malafide and willful intention to evade payment of duty. As such, I am of the view that imposition of penalty on the appellant is not justified - Decided in favour of assessee.

Summary

Issues: Exemption withdrawal leading to duty imposition, Incorrect filing of returns, Imposition of penalty for non-payment of duty.

Exemption Withdrawal and Duty Imposition: The appellants were manufacturing wooden spools exempted from duty under Notification No. 10/2003-CE. Subsequently, duty was imposed under Notification No. 10/2006. The appellants continued to clear goods without payment of duty, unaware of the new notification. Upon discovery during an audit, they deposited the duty and interest promptly.

Incorrect Filing of Returns: Despite a change in jurisdiction from S.C. Road to Vijayanagar, the appellants continued filing returns at the former branch. The audit revealed this anomaly, leading to proceedings for demand confirmation, interest, and penalty imposition.

Imposition of Penalty: The appellant argued that the non-payment of duty was inadvertent due to lack of awareness about the new notification. The Revenue contended that the incorrect filing of returns indicated malafide intent. The appellate authority noted the appellant's prior compliance, proper record-keeping, and acceptance of returns by the authorities without raising duty payment issues. The Managing Director's statement also reflected unawareness of the duty imposition. The tribunal concluded that the non-payment was a genuine mistake, not malafide, as there was no intention to evade duty willfully. Therefore, the penalty imposition was deemed unjustified, and the demand of duty and interest was confirmed while setting aside the penalty.

This judgment emphasizes the importance of intention in penalty imposition under Section 11AC, highlighting that penalties should be reserved for cases of malafide and willful evasion of duty. It also underscores the significance of maintaining proper records and compliance, while acknowledging genuine mistakes due to lack of awareness of legal provisions.