2015 (10) TMI 1327 - AT - Central Excise

Penalty u/s 11AC - Evasion of duty - Held that - Persons that does not show the reason why the department failed to ask question to know the reason why the duty collected was not deposited. Department has not come out with clear evidence to show malafides of the appellants or their contumacious conduct to establish evasion. - Section 11AC of Central Excise Act 1944 has two essential ingredients. First ingredient is intention and the second one is evasion . From the totality of the reading of the records that nowhere exhibits the intention of the appellants to defraud Revenue with a view to cause evasion or deliberately suppressed facts. No doubt awaiting registration appellant made first clearance but realized duty. There is nothing on record to show habitual conduct of evasion not being discovered by any direct or circumstantial evidence. Intention of the appellant does not appear to be evasive. Therefore presumption of ill intention to cause evasion is impermissible on the facts and circumstances of the case. Therefore there shall not be penalty on both the appellants. - Decided in favour of assessee.

Summary

Issues: Duty evasion, Penalty imposition, Intention to defraud Revenue

The judgment by the Appellate Tribunal CESTAT Chennai involved a case where an appellant company, new to Indian law, commenced manufacturing "Conveyor Belts" in July 2006. The company applied for registration under the Central Excise Law, which was granted w.e.f. 22.09.2006. The appellant made the first clearance of goods to a buyer before registration, collecting excise duty with the sales consideration. The appellant argued that they were unaware of the time for duty deposit and did not have any intention to evade payment. The Revenue detected the duty evasion on 06.03.2007, and the appellant deposited the duty with interest on 08.03.2007. The appellant contended that Section 11AC should not apply automatically to impose a significant penalty of Rs. 42,13,660, as there was no deliberate intention to evade. The Tribunal found that there was no evidence of malafides or contumacious conduct to establish evasion, and the appellant's conduct did not demonstrate an intention to defraud Revenue.

The appellant also raised the issue of penalty imposition on the Managing Director of the company, who faced a penalty under Rule 26 of Central Excise Rules, 2002. The Commissioner (Appeals) had partially reduced the penalty imposed on the Managing Director but dismissed the appeal of the company. The appellant did not dispute the duty liability and prayed for the penalty to be waived for both the Managing Director and the company, considering the circumstances. The Revenue argued that the appellant's failure to deposit the duty collected from the buyer amounted to duty evasion, even though the duty was later deposited with interest. The Revenue contended that mere payment of interest did not absolve the appellant from penalty imposition.

After hearing both sides and examining the records, the Tribunal noted that there was no clear evidence of malafides or contumacious conduct by the appellants to establish evasion. The Tribunal emphasized that Section 11AC of the Central Excise Act, 1944, required proof of both "intention" and "evasion." The Tribunal found that there was no intention on the part of the appellants to defraud Revenue or deliberately evade duty. The Tribunal cited the case of Continental Foundation Joint Venture Vs. CC, Chandigarh - 2007 (216) ELT 177 (S.C.) to support its decision. Consequently, the Tribunal allowed both appeals, ruling that there should be no penalty imposed on either the company or the Managing Director based on the facts and circumstances of the case.

In conclusion, the judgment by the Appellate Tribunal CESTAT Chennai addressed the issues of duty evasion, penalty imposition, and the intention to defraud Revenue in a case involving a company new to Indian law. The Tribunal found that there was no evidence of deliberate evasion or malafides on the part of the appellants, leading to the decision to waive the penalty imposed on both the company and the Managing Director. The judgment highlighted the importance of proving intention and evasion under Section 11AC of the Central Excise Act, emphasizing that the presumption of ill intention should not be made without concrete evidence.