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2008 (11) TMI 158 - AT - Central ExciseImposition of mandatory penalty - in view of the self removal procedure(SRP), the Respondents ought to have acted in time to revise the value of their product consequent to increasing the price of Sandalwood - it is true that Mysore unit did not revise the cost in time. The said lapse resulted in loss of revenue only to the Mysore Commissionerate - duty is payable by them and they could not have taken a shelter under limitation provisions - there is no duty escapement at all and the Revenue has not suffered any loss in this irregularity - Credit was admissible to Bangalore unit - no infirmity in the impugned order to drop the penalty proceedings
Issues: Duty demand upheld, imposition of penalty under Section 11AC, Cenvat credit availment, examination of issues by Commissioner, imposition of penalty based on circumstances.
Duty Demand Upheld: The Tribunal upheld the duty demand and invocation of the longer period due to the escalated cost of sandalwood oil not being correctly accounted for in stock transfer to the Bangalore unit. The Tribunal agreed with the adjudicating authority that there was an intention to evade payment of duty, leading to the sustainment of the Central Excise duty demand and interest. The Commissioner's order was challenged by the Revenue for not imposing an equal penalty under Section 11AC, citing the Supreme Court's decision that there is no discretion available on the quantum of penalty under this section. Imposition of Penalty under Section 11AC: The Revenue argued for the imposition of an equal penalty on the Respondents based on the Tribunal's findings and the Supreme Court's ruling that penalties under Section 11AC are mandatory. However, the learned Advocate pointed out that the Commissioner had considered the circumstances, including no revenue loss to the exchequer, and thus decided not to impose a penalty. The Tribunal found no infirmity in the Commissioner's decision to drop the penalty proceedings against the Respondents, considering the totality of the circumstances and the absence of duty escapement. Cenvat Credit Availment: The Tribunal discussed the availment of Cenvat credit at the Bangalore factory, emphasizing that the transaction between the two Government factories did not result in revenue loss to the exchequer. The Commissioner's detailed reasoning highlighted that the final product, toilet soaps, was cleared under Section 4A at the maximum retail price, ensuring no duty escapement. The Tribunal upheld the allowance of Cenvat credit by the Bangalore unit, as there was no justification to deny it based on the supplementary invoices issued by the Mysore factory. Examination of Issues by Commissioner: The Commissioner's examination of the case included the failure to adopt the correct assessable value for sandalwood oil transferred to the Bangalore unit, which was considered a lapse. Despite this, the Commissioner noted that there was no manipulative sale of sandalwood oil in Bangalore, and no risk to revenue existed due to the self-removal procedure and the duty payment on the final product at the maximum retail price. The Commissioner's decision not to impose a penalty was supported by the Supreme Court's ruling that penalties should be based on the facts and circumstances of each case. In conclusion, the Tribunal upheld the Commissioner's decision to drop the penalty proceedings against the Respondents, considering the absence of duty escapement and no revenue loss to the Government. The detailed analysis of the issues surrounding duty demand, penalty imposition, Cenvat credit availment, and the examination by the Commissioner provided a comprehensive understanding of the case's legal intricacies and the reasoning behind the judgments delivered.
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