2017 (3) TMI 717 - AT - Central Excise

Waiver of penalty imposed u/s 11AC - immediately after pointing out by the department the appellant have admittedly paid the excise duty along with interest and informed to the department before issuance of the SCN - Held that - in terms of section 11A(2B) the SCN should not be issued if the assessee deposited the duty along with interest without contesting the same and informed to the department - In the present case, the appellant has followed the requirement of such section. Accordingly, no SCN should have been issued; consequently no further penalty could have been imposed - penalty set aside - appeal allowed - decided in favor of appellant.

Summary

Issues: Undervaluation of goods, imposition of penalty under Section 11AC, waiver of penalty based on timely payment of duty and interest

In this case, the appellants were clearing goods manufactured on a job work basis undervalued under the cost construction method, leading to a dispute with the department regarding the correct quantification of the value. The department alleged undervaluation due to elements like the cost of processing logs and transportation. A surprise check by a departmental officer revealed the undervaluation, prompting the appellants to pay the duty and interest before a show-cause notice was issued. The adjudicating authority confirmed the demand of differential duty and imposed a penalty under Section 11AC. The appellants appealed to the Commissioner (Appeals) but were rejected, leading them to appeal to the tribunal.

During the tribunal hearing, the appellant did not appear, while the revenue reiterated the findings of the impugned order. The tribunal considered the submission made by both sides and focused on the issue of penalty waiver under Section 11AC. The appellant argued that since the duty and interest were paid promptly upon departmental pointing out, no show-cause notice should have been issued. The tribunal agreed, noting that the appellant had paid the duty and interest without contesting and informed the department, meeting the requirements of Section 11A(2B). As a result, the tribunal concluded that no show-cause notice should have been issued, and therefore, no further penalty could be imposed.

Ultimately, the tribunal found that the appellant had a valid case for non-imposition of penalty under Section 11AC and decided to set aside the penalty and modify the impugned order accordingly. The appeal was allowed in favor of the appellant, with the decision pronounced in court on 06/02/17.