2016 (3) TMI 262 - AT - Central Excise

SSI exemption benefit under Notification No. 8/2002-CE dated 01.3.2002 denied - demand of duty alongwith interest and imposed penalty of equal amount of duty on the assessee and also imposed penalty of ₹ 5 Lakh on the partner of the assessee, amongst others - Held that - The partner of the assessee, in various statements, had categorically stated that they had charged invoice value to the customers including the duty and other taxes. It is seen that the customers, in their statements had also admitted that the value is inclusive of excise duty. Hence, while computing the value of clearances for the purpose of exemption notification, it should be determined after extending cum-duty benefit. We find that the Tribunal in the case of Meghdoot Gramoudyog Sewa Sansthan vs. CCE, Noida (2010 (11) TMI 911 - CESTAT NEW DELHI ) held that the assessee being found ineligible for exemption, the sale price has to be treated as including excise duty and assessable value determined after abating it. Thus it is clear that the invoices mentioned in Annexure C of the Show Cause Notice has already been included in the Annexure A while computing the value of clearances. Therefore, the demand of duty as shown in Annexure C , as included in Annexure A , cannot be sustained. We find that the demand of Central Excise duty on the partnership firm was confirmed and the penalty was imposed under Section 11AC of the Central Excise Act, 1944. It is noticed that the partnership firm has already paid the duty alongwith interest and penalty to the extent of 25% of the duty, as per Section 11AC of the Act. Therefore, in the facts and circumstances of the case, imposition of separate penalty on the Partner of the firm (i.e. Appellant No.2) is not justified. Demand of duty alongwith interest and penalty with the option to pay 25% of duty under Section 11AC of the Central Excise Act, 1944, on the assessee are upheld; subject to, the value of clearances for the purpose of determining exemption benefit, the cum-duty benefit would be extended and the demand of duty on the basis of Annexure C to the Show Cause Notice alongwith interest and penalty is set-aside. The adjudicating authority is directed to re-determine and re-quantify the demand of duty, interest and penalty as per above directions.

Summary

Issues:
1. Wrongful availment of SSI exemption benefit under Notification No. 8/2002-CE.
2. Duplication of demand of duty in the show cause notice.
3. Entitlement to cum-duty price benefit.
4. Imposition of penalty on the partner of the firm.

Analysis:
1. The case involved the wrongful availment of SSI exemption benefit by a partnership firm engaged in manufacturing activities. Central Excise officers discovered this during a factory visit and issued a Show Cause Notice proposing duty demand, interest, and penalties for the period in question. The adjudicating authority confirmed the duty demand, interest, and imposed penalties on both the firm and the partner. The appeals were filed challenging these decisions.

2. The advocate for the assessee argued that the demand was based on alleged wrongful availment due to parallel invoices issued in another name. However, the firm paid the duty, interest, and a portion of the penalty without dispute. The main contention was the entitlement to cum-duty price benefit and the alleged duplication of duty demand in the show cause notice. Citing relevant tribunal decisions, the advocate emphasized the inclusion of excise duty in the invoice value, which should be excluded while computing clearance value for exemption purposes.

3. The authorized representative for the Revenue reiterated the adjudicating authority's findings, stating there was no provision under the Central Excise Act to extend the cum-duty price benefit. However, after considering statements from both the firm and buyers indicating inclusion of duty in the invoice value, the Tribunal found in favor of the assessee. Referring to past judgments, the Tribunal highlighted that the assessable value should be determined after extending the cum-duty benefit, especially when the price includes excise duty.

4. The Tribunal observed that the duty demand on the partnership firm was confirmed, and penalties were imposed under Section 11AC of the Central Excise Act. However, since the firm had already paid the duty, interest, and a portion of the penalty, the imposition of a separate penalty on the partner was deemed unjustified. Citing precedents, the Tribunal set aside the penalty imposed on the partner. The demand of duty, interest, and penalty on the firm was upheld with the directive to re-determine and re-quantify as per the Tribunal's directions.

In conclusion, the Tribunal upheld the demand of duty, interest, and penalty on the firm while setting aside the penalty on the partner. The case highlighted the importance of correctly determining assessable value for exemption benefits and the application of cum-duty price principles in such cases.