2016 (2) TMI 714 - AT - Central Excise

Penalties imposed under Section 11AC and Rules 25 and 26 of the Central Excise Rules - Duty was deposited before issuance of SCN - Held that - As there is no dispute about the fact that such short payment, which according to the appellant has occurred inadvertently, on account of non-computation of the value of clearances, was detected by themselves only. The said fact of exceeding the exemption limit came to the notice of the appellant by way of their own audit. As such, in such a scenario, no mala fide can be attributed to the assessee. The differential duty already stands deposited by the appellant immediately after the detection of the mistake, along with interest. The demand of interest is in the nature of a penal action. I fully agree with the learned advocate that in such a scenario no other proceedings should have been initiated against the appellant. The legislative intent for creation of the said sub-section is to avoid any futile litigation, which purpose stands defeated by the lower authorities by issuing show cause notice to the appellant. Having said so we set aside the impugned orders of the authorities below upholding the penalties imposed under Rules 25 and 26 of the Central Excise Rules. Inasmuch as penalties stand set aside, imposed in terms of the above Rule, no infirmity can be found for non-imposition of penalty under Section 11AC. Accordingly the Revenue s appeal is required to be rejected. - Decided in favour of assessee

Summary

Issues:
1. Applicability of penalties under Section 11AC and Rules 25 and 26 of Central Excise Rules.

Analysis:
The case involved the appellant, a manufacturer of Tool Holders and Boring Bars, who inadvertently crossed the small-scale exemption limit during the financial year 2006-07. Upon self-audit, the appellant realized the oversight and voluntarily paid the duty amount along with interest before any intervention by the Revenue. The original adjudicating authority imposed penalties under Section 11AC and Rules 25 and 26 of Central Excise Rules. The Commissioner (Appeals) set aside the penalty under Section 11AC but upheld the penalties under Rules 25 and 26, citing contravention of Central Excise Act provisions.

The Tribunal considered the appellant's voluntary disclosure, payment of duty, and absence of mala fide intent. Referring to Section 11A(2B) of the Central Excise Act, the Tribunal noted that no show cause notice is required if duty is paid by the assessee upon self-ascertainment before any departmental intervention. The Tribunal emphasized that the legislative intent behind the provision was to avoid unnecessary litigation. It was observed that the penalties imposed under Rules 25 and 26 were unwarranted in the absence of deliberate wrongdoing or evasion. Consequently, the Tribunal set aside the penalties under Rules 25 and 26, leading to the rejection of the Revenue's appeal.

In conclusion, the Tribunal allowed the appeals filed by the assessees and rejected the appeal filed by the Revenue. The judgment highlighted the importance of voluntary compliance, self-disclosure, and the legislative intent to prevent unnecessary legal actions in cases of inadvertent errors without fraudulent intent.