2017 (2) TMI 1029 - AT - Central Excise

Imposition of penalty u/s 11 AC of the Act - respondent, a declarant unit, were availing SSI exemption in respect of their own goods and simultaneously were manufacturing and clearing branded goods of another person without payment of Central Excise duty - Held that - there is no allegation of any contumacious conduct or deliberate defiance of the provisions of law on the part of the respondent-assessee, in availing the SSI exemption - the Ld. Commissioner (Appeals) is correct in deleting the penalty u/s 11 AC of the Act holding that there is no case of deliberate defiance of law and further the assessee have paid the tax on being so pointed out by the Revenue - appeal dismissed - decided against Revenue.

Summary

Issues:
Whether the penalty imposed under Section 11 AC of the Act was rightly deleted by the Learned Commissioner (Appeals).

Analysis:

The case involved a situation where the assessee was availing SSI exemption for their own goods while also manufacturing and clearing branded goods of another person without paying Central Excise duty. The respondent admitted the lapse and voluntarily debited the duty before the show-cause notice was issued. In a previous round of litigation, the Tribunal observed that penalty was set aside because duty was paid before the notice, citing relevant case law. The matter was remanded back to the Commissioner (Appeals) for reconsideration in light of a decision by the Punjab and Haryana High Court.

The Commissioner (Appeals) noted that the Tribunal's ruling had been appealed before the Supreme Court and subsequently dismissed. Upholding the Tribunal's order, the Commissioner held that penalty is not impossible in cases where duty is paid before the issuance of a show-cause notice. The Commissioner also referred to judgments by various High Courts supporting this view. The Revenue, aggrieved by this decision, appealed before the Tribunal, arguing that the assessee would have continued evading duty if the irregularity had not been detected.

During the Tribunal hearing, the assessee was absent despite notice. After considering the Revenue's arguments and reviewing the records, the Tribunal found no evidence of deliberate defiance of the law by the assessee in availing the SSI exemption. It was concluded that there was no contumacious conduct on the part of the assessee, as they paid the tax upon being informed by the Revenue. Consequently, the Tribunal upheld the Commissioner's decision to delete the penalty under Section 11 AC of the Act, dismissing the Revenue's appeal.