2017 (2) TMI 939 - AT - Central Excise

Imposition of penalty u/s 11AC of the Act - zinc alloy - job-work - Held that - no positive evidence has been shown by the Revenue to establish that appellants were having malafide intentions not to pay duty or undervalue the job worked goods - when the appellant has paid duty along with interest on pointing out by the Audit, in that circumstances, if Revenue wants to issue the SCN, the same was required to be issued but within the prescribed time limit, but the same has not been done by the Revenue. Extended period of limitation - Held that - relying on the decision of Orissa Bridge & Construction Corpn. Ltd. vs. CCE Bhubaneswar 2008 (8) TMI 585 - SUPREME COURT OF INDIA , it is held that extended period of limitation is not invokable for issuance of SCN. Penalty set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
Imposition of penalty under section 11AC of the Act without issuance of show cause notice within the prescribed time limit.

Analysis:
The appellant appealed against the penalty imposed under section 11AC of the Act for not calculating the assessable value as per the Central Excise Valuation Rules. The appellant had removed zinc alloy to a manufacturer on job work basis and paid duty along with interest upon Audit's pointing out. A show cause notice was later issued for duty demand, interest, and penalty. The appellant argued that as per section 11A(2B) of the Central Excise Act, no show cause notice was required, making the penalty inapplicable. The appellant also claimed a revenue-neutral situation due to Cenvat Credit entitlement to the principal manufacturer, citing relevant case laws. The Revenue, however, supported the impugned order.

Upon detailed consideration, the Tribunal noted that the appellant had paid duty and interest upon Audit's observation, entitling them to Cenvat Credit. As per section 11A(2B), proceedings should have ended there. The Tribunal highlighted that the Revenue failed to establish any malafide intent on the appellant's part or evidence of evasion. The show cause notice issued beyond the time limit was deemed time-barred, following the precedent set in Orissa Bridge & Construction Corpn. Ltd. case. Due to the lack of evidence of malafides and the time-barred notice, the Tribunal concluded that the penalty under section 11AC was not applicable. Citing the Orissa Bridge case, the Tribunal set aside the penalty imposed on the appellant, allowing the appeal.

This judgment clarifies the importance of adhering to statutory timelines for issuing show cause notices and the necessity of establishing malafide intent for penalty imposition under section 11AC of the Act.