2016 (2) TMI 556 - AT - Central Excise

Evasion of duty - penalty imposed under Rule 173Q of Central Excise Rules, 1944 and Rule 25 of Central Excise Rules, 2002 - Held that - We find that the respondent right from beginning had informed the department regarding removal of 105 prototype vehicles and they have bonafidely claimed exemption under Notification No. 161/71 and on rejection of the request for extending the benefit of the said notification by the department, they cleared the vehicles on payment of duty taking the highest approximate value of the vehicles. In the present case, the issue is only of payment of differential duty which also they paid before issuance of show-cause notice. Therefore, we do not find any mala fide intention on the part of the respondent and the facts clearly show that there is no intention of evasion of any duty. Taking into consideration the overall facts, the learned Commissioner (Appeals) has rightly dropped the penalty. We, therefore, uphold the impugned order and dismiss the Revenue s appeal. - Decided in favour of assessee

Summary

Issues:
1. Imposition of penalty under Rule 173Q of Central Excise Rules, 1944 and Rule 25 of Central Excise Rules, 2002.
2. Applicability of Notification No. 161/71 dated 11.7.1971 for prototype vehicles.
3. Validity of dropping the penalty by the Commissioner (Appeals).

Analysis:
1. The appeal concerned the imposition of a penalty under Rule 173Q of Central Excise Rules, 1944 and Rule 25 of Central Excise Rules, 2002. The respondent had cleared 105 prototype vehicles based on the price set by their marketing department, subject to trials. The department insisted on payment of duty, leading the respondent to pay the duty along with interest before a show-cause notice was issued. The penalty imposed equaled the duty amount. The Commissioner (Appeals) allowed the appeal, setting aside the penalty. The Revenue appealed, arguing that penalties should be mandatory under Section 11AC, citing relevant case law.

2. The issue of the applicability of Notification No. 161/71 dated 11.7.1971 for prototype vehicles was crucial. The respondent had informed the department about the clearance of prototype vehicles and requested the benefit of this notification. Upon the department's rejection, the respondent voluntarily paid the duty and interest. The respondent's actions indicated no intention to evade duty payment, as they had disclosed all relevant information to the department. The Tribunal found that the respondent acted in good faith and cleared the vehicles after paying the differential duty before any show-cause notice was issued.

3. The validity of dropping the penalty by the Commissioner (Appeals) was extensively discussed. The Tribunal upheld the Commissioner's decision, emphasizing that the respondent had promptly paid the duty upon the department's rejection of the notification benefit. There was no evidence of mala fide intent or suppression of facts. The Tribunal concluded that the respondent's actions were transparent, and there was no evasion of duty. Therefore, the penalty was rightly dropped, and the Revenue's appeal was dismissed. The judgment highlighted the importance of good faith compliance and full disclosure of information in excise duty matters.