2016 (11) TMI 863 - AT - Central Excise

Eligibility of exemption under N/N. 5/98-CE, dt.3.6.1998 - Air Mingled Polyester Yarn - Air Mingled Polyester Yarn were exempted prior to 01.03.1999 by virtue of Notification No.5/98-CE, dt.3.6.1998. However, the said product became remove from the exemption list w.e.f. 1.3.1999 - whether benefit of exemption will be available for the clearance of the goods during the period January 1999 to March 1999? - the Appellant did not dispute about the duty, but assailed the impugned order for imposing penalty equal to the duty confirmed - Held that - The contention of the learned Advocate is that in absence of suppression, mis-declaration etc, penalty equal to duty cannot be imposed; also it is his contention is that due to the budgetary changes, immediately they could not come to know about the change of notification, and removal of the product manufactured by the Appellant from the list of exempted goods. In these circumstances, I am of the view that imposing penalty equal to the duty confirmed would be too harsh. However, it cannot be denied that there was violation of the provisions of the Central Excise Act and the Rules made thereunder while clearing the goods availing the exemption Notification. Therefore, imposing of nominal penalty would meet the ends of justice. Keeping in view the circumstances, in my opinion, imposition of penalty of ₹ 5,000/- would suffice the purpose. Accordingly, the penalty is reduced from ₹ 44,021/- to ₹ 5,000/- (Rupees Five Thousands only). On the issue of levy of interest, I find force in the contention of the learned Advocate, in view of the judgment of the tribunal National Fertilizers Ltd 2003 (11) TMI 397 - CESTAT, NEW DELHI . Therefore, the interest confirmed under Section 11AB is set aside. Appeal allowed - decided partly in favor of appellant.

Summary

Issues:
- Appeal against OIA No.MS/73/SRT-II/2008
- Exemption notification for Air Mingled Polyester Yarn
- Demand notice for recovery of duty
- Imposition of penalty under Section 11AC
- Appeal before Commissioner (Appeals)
- Reduction of duty and penalty by Commissioner (Appeals)
- Appeal against penalty and interest
- Applicability of Section 11AB of Central Excise Act, 1944
- Comparison with judgment of National Fertilizers Ltd Vs CCE New Delhi-III - 2004 (164) ELT 455 (Tri-Del)
- Reduction of penalty to &8377; 5,000
- Setting aside of interest confirmed under Section 11AB

Analysis:
The appeal was filed against OIA No.MS/73/SRT-II/2008, concerning the exemption notification for Air Mingled Polyester Yarn. The Appellants had availed the benefit of the exemption notification during March, leading to a demand notice for duty recovery. The duty amount was confirmed at &8377; 64,923, with a penalty imposed under Section 11AC. The Commissioner (Appeals) reduced the duty further to &8377; 44,021 and imposed an equal penalty under Rule 173Q of Central Excise Rules 1944, along with directing interest recovery under Section 11AB of the Central Excise Act, 1944.

The Appellant contended that the clearance under the exemption notification in March was due to a bonafide mistake, with the duty subsequently paid. It was argued that there was no suppression of facts as the relevant production quantity was recorded in statutory records. The Appellant's representative highlighted that prior to 11.05.2001, Section 11AB of the Central Excise Act required elements like suppression or mis-declaration for interest imposition, citing the judgment in National Fertilizers Ltd case.

The Revenue's representative supported the Commissioner (Appeals) findings. The Member (Judicial) noted that while the duty was not disputed, the Appellant challenged the penalty equal to the confirmed duty. Considering the circumstances, a penalty of &8377; 5,000 was deemed sufficient instead of &8377; 44,021. The Member acknowledged the violation of Central Excise Act provisions but deemed a nominal penalty appropriate. The interest confirmed under Section 11AB was set aside based on the precedent of the National Fertilizers Ltd case.

In conclusion, the impugned order was modified to reduce the penalty to &8377; 5,000 and set aside the interest confirmed under Section 11AB, partially allowing the appeal to that extent.