2017 (3) TMI 1451 - AT - Central Excise

Penalty u/s 11AC of CEA,1944 - clearance of Copper Strips, a raw material for manufacture of the Transformer, to their another unit, on reversal of the credit availed on the inputs - Revenue s case is that what cleared by them being input not as such but a processed one, therefore, the duty should be paid - Held that - it was a mistake on the part of the excise clerk to ascertain the correct duty liability in as much as the inputs which were procured, later processed and became semi-finished goods, even though cleared to their sister unit, did not remain as such, hence the assessment of duty ought to have been made by determining its value applying Rule 8 by adopting CAS-4 method and not by reversing credit availed - the appellant after being pointed out by the audit and issuance of SCN, discharged the entire amount of duty and interest which is recorded by the Ld Commissioner (Appeals) in the impugned order. Thus, in absence of suppression of facts or mis-declaration, penalty u/s 11AC of CEA, 1944 cannot be sustained - appeal allowed - decided in favor of assessee.

Summary

Issues:
- Appeal against demand of duty, interest, and penalty
- Imposition of penalty under Section 11AC of CEA,1944

Analysis:
The appeal in this case is against an order passed by the Commissioner of Central Excise, CUSTOMS (Appeals)-VADODARA-II, where duty amounting to &8377; 4,02,194/- was proposed to be recovered from the appellants along with interest and penalty. The appellants, engaged in the manufacture of Transformers, had cleared Copper Strips to their sister unit, leading to a demand for duty payment under Rule 8 of the Central Excise Valuation Rules,2000. The Commissioner confirmed the demand, interest, and penalty. The appellant contended that the duty short payment was due to a bonafide mistake by the billing clerk, and they had paid the entire amount of duty and interest before the show cause notice was issued. The appellant did not dispute the duty liability but contested the imposition of penalty equal to the duty amount. The main issue to be addressed was whether penalty under Section 11AC of CEA,1944 was imposable on the appellant.

The Tribunal found that the appellants had cleared the processed inputs after debiting the credit availed on them, but it was a mistake on the part of the excise clerk to determine the duty liability correctly. The processed inputs, which became semi-finished goods, did not remain "as such," necessitating the assessment of duty by determining its value using the CAS-4 method under Rule 8 of Central Excise Valuation Rules,2000, instead of reversing the credit availed. Despite the mistake, the appellants paid the entire duty and interest upon being pointed out by the audit and issuance of the show cause notice. Since there was no suppression of facts or mis-declaration with intention, the Tribunal held that the penalty under Section 11AC of CEA,1944 could not be sustained. As no other penalty had been invoked or confirmed, the penalty under Section 11AC was set aside, and the appeal was allowed.