2016 (2) TMI 66 - AT - Central Excise

Failure to pay the duty on time - Penalty under Section 11AC - Held that - A perusal of invoice No.16 dated 8.6.2005 issued by the appellant clearly shows that though the duty has been charged, but the same was not deposited. Further, on the invoice, it is clearly mentioned that no sales tax is charged as the goods are being transferred to their own unit No.II which is situated in Andheri (East) and it appears that the goods were intended to be transferred to their own unit, but inadvertently instead of issuing challan, the appellant has wrongly issued the invoice. It is also a fact that the appellant has paid the duty along with interest on being pointed out by the audit officer of the respondent vide entry in PLA dated 27.11.2007. When there is no intention to evade payment of duty on account of fraud, wilful misstatement, suppression of fact etc. as mentioned in Section 11AC, the penalty cannot be imposed and further, for imposition of penalty under Section 11AC, the duty must be determined by the excise officer after giving sufficient opportunity to the appellant as required in Section 11A(10), which has not been done in this case and as per Section 11A(b), it is provided that the person chargeable to duty may, before service of notice under clause (a), pay on the basis of (i) his own ascertainment of such duty or, (ii) the duty ascertained by the Central Excise officer and if the person pays the duty along with interest payable thereon under Section 11AA, then as per sub-section (ii), the Central Excise officer shall not serve any notice upon him. Since in this case there is no determination of duty and in accordance with law as provided in sub-section (10) of Section 11A, therefore under Section 11AC, penalty cannot be imposed - Decided in favour of assessee

Summary

Issues:
- Appeal against order-in-appeal upholding order-in-original for failure to pay excise duty.
- Appellant's unintentional clerical error leading to penalty imposition under Section 11AC.
- Interpretation of Section 11AC for penalty imposition in absence of fraud or wilful misstatement.

Analysis:
1. The appeal challenged the order-in-appeal affirming the order-in-original due to the appellant's failure to pay excise duty on time. The appellant, engaged in manufacturing machinery parts, cleared goods without paying duty timely as required by Rule 8 of the Central Excise Rules, 2002. The appellant rectified the error post-audit and paid the duty with interest. The Assistant Commissioner issued a show cause notice imposing penalty under Section 11AC of the Central Excise Act, leading to the present appeal.

2. The appellant argued that the clerical error was unintentional, citing ignorance and procedural missteps by the excise clerk. They contended that the duty was admissible as cenvat credit to their unit, causing no loss to the exchequer. The appellant relied on precedents to support their claim that penalty under Section 11AC requires fraud or wilful misstatement, absent in this case. The appellant's submissions aimed to demonstrate that the penalty imposition was incorrect and illegal based on legal interpretations and previous judgments.

3. The Tribunal analyzed the facts, noting the appellant's rectification of the error post-audit and payment of duty with interest. The Tribunal deliberated on the applicability of Section 11AC for penalty imposition, emphasizing the necessity of fraud or intentional evasion of duty for such penalties. The Tribunal highlighted the procedural requirements under Section 11A for duty determination before penalty imposition under Section 11AC. As the duty was not determined following due process, the Tribunal concluded that penalty under Section 11AC could not be imposed. Consequently, the Tribunal set aside the penalty and allowed the appeal, emphasizing the legal requirements for penalty imposition under the Central Excise Act.

This comprehensive analysis of the judgment highlights the issues, arguments presented, legal interpretations, and the Tribunal's decision, providing a detailed understanding of the case and its implications.