2019 (9) TMI 1586 - AT - Central Excise

Penalty under Section 11AC of the Act - short payment of tax - production and clearance of Coal to Jayaswal Neco Industries Ltd., Raipur a sister concern - revenue neutrality - HELD THAT - It is admitted fact that the respondent had the mining unit at Raigad and pursuant to the mining operation, the mining unit transfers coal to their steel manufacturing unit at Raipur for captive consumption. Further, admitted fact is that the output of both the mining unit as well as the steel manufacturing unit is dutiable. Thus, the situation is wholly Revenue neutral. Further, it is admitted fact that the respondent has deposited the differential duty after getting the inputs from the Cost Accountant, in the form of CAS-4 report/ certificate. Thus, there is no condition precedent available for imposition of penalty. Penalty rightly set aside - appeal dismissed.

Summary

Issues:
- Justification of setting aside penalty under Section 11AC of the Act by the Commissioner (Appeals).

Analysis:
The case involved an appeal against an order regarding the imposition of penalty under Section 11AC of the Act. The respondent, engaged in the manufacture of Coal, had not correctly discharged their duty liability, resulting in short payment of central excise duty. The respondent had contravened various provisions of the Central Excise Rules, leading to a short payment of duty amounting to ?61,43,604. The respondent agreed and paid the said amount along with interest. Subsequently, a show cause notice was issued proposing the demand of the same amount along with interest and penalty under Section 11AC(1)(c) of the Central Excise Act, 1944. The adjudicating authority confirmed the demand, interest, and imposed a penalty of ?61,43,604 under Section 11AC(1)(c) of the Act.

The respondent appealed before the Commissioner (Appeals) who observed that the respondent had voluntarily paid the differential duty with interest before the show cause notice was issued. The Commissioner found no evidence of fraud, suppression of facts, or misrepresentation by the respondent, which are prerequisites for imposing a penalty. Consequently, the Commissioner set aside the penalty. The Revenue challenged this decision before the Tribunal, arguing that the respondent had challenged the differential duty in the first appeal and on the ground of limitation.

After hearing both parties and examining the record, the Tribunal noted that the respondent had a mining unit transferring coal to a steel manufacturing unit for captive consumption, both units being dutiable. The respondent had deposited the differential duty based on a Cost Accountant's report. As there was no evidence of any conditions for imposing a penalty, the Tribunal upheld the Commissioner's decision to set aside the penalty under Section 11AC. The Tribunal deemed the situation as Revenue neutral and disposed of the miscellaneous application accordingly.