2017 (1) TMI 494 - AT - Central Excise

Imposition of penalty - Classification of intermediate product in dispute for long time - Soya Gums - Held that - Ultimately, the classification of the product under heading 1522 has been accepted by the assessee and differential duty paid. Under the circumstances, I am of the view that the benefit of section 11A (2)(B) cannot be extended in view of the explanation-1. The appellant will be entitled to the benefit of payment of penalty of 25% of the differential duty as the differential duty as well as interest stands paid by them before issue of Show Cause Notice - appeal disposed off - decided partly in favor of appellant.

Summary

Issues:
Classification of product Soya Gum under different chapter headings, payment of duty and interest, imposition of penalty under section 11AC.

Classification of Product Soya Gum:
The appellant, engaged in the manufacture of Refined Soya bean Oil, faced a dispute regarding the classification of the product Soya Gum. Initially classified under chapter heading 15220090, the appellant later changed it to 13019019 and then to 15079090. The Revenue contended that the product should be classified under heading 1522, as it was originally done. The appellant paid the differential Central Excise duty and interest upon realizing the error. However, a Show Cause Notice was issued, leading to a penalty under section 11AC. The appellant challenged the penalty, arguing that since duty and interest were paid before the notice, no penalty should be imposed.

Payment of Duty and Interest:
The appellant accepted the classification proposed by the Revenue under heading 1522 and paid the differential duty along with interest. The Revenue's investigation revealed that the product remained the same but was described differently as Soya Oil Sludge. The tribunal noted that the benefit of section 11A (2) (B) could not be extended due to willful misstatement or suppression of facts, as explained in the provision.

Imposition of Penalty under Section 11AC:
The tribunal considered the first proviso to section 11AC, which allows for a penalty of 25% of the differential duty if duty and interest were paid before the Show Cause Notice was issued. As the appellant had fulfilled this condition, the penalty was waived, and the appeal was disposed of accordingly.

This judgment clarifies the importance of accurate classification and description of products for excise duty purposes. It emphasizes the consequences of misstatement or suppression of facts, while also highlighting the provisions that govern the imposition of penalties in such cases.