2017 (5) TMI 280 - AT - Central Excise

SSI exemption - appellant have been erroneously availing the benefit of Notification No.8/2003 to calculate the duty liability; but discharged the same with interest on 12/06/2006 and informed the department on 21/06/2006 - demand of interest - penalty u/s 11AC - Held that - charge to evade Central Excise duty, was based only on an allegation that appellant being in the organized sector should have known the law and should have read the notification correctly before availing the benefit and it cannot be said that they were unaware of the law. Only on this allegation it has been stated that appellant has suppressed the fact from the department with intention to evade Central Excise duty, which is not correct. Provisions of Section 11A(2B), as it stood during the relevant period, specifically states for non-issuance of show cause notice on discharging duty liability and the interest thereof, on ascertainment of duty liability by an assessee on their own or on being pointed out by the Central Excise officer. As already recorded herein above, it is the claim of appellant that due to mis-interpretation of the clause of the notification the duty was short paid during the relevant period, which made good by the appellant before issuance of show cause notice. If this be so, it cannot be said that the appellant had intention to evade payment of Central Excise duty on the branded goods manufactured and cleared by them. The decision of the apex Court in the case of Chamundi Die Cast (P) Ltd 2007 (5) TMI 55 - SUPREME COURT OF INDIA specifically holds that if an assessee acted on genuine belief that they were covered by the exemption notification, it cannot be held against them and hold that there was intention to evade duty. Penalty set aside - duty with interest upheld - appeal allowed - decided partly in favor of appellant.

Summary

Issues:
1. Availing small scale exemption benefit on pastries, cookies, chocolates, cakes.
2. Erroneous calculation of duty liability and subsequent payment with interest.
3. Show cause notice seeking confirmation of demands, interest, and penalties.
4. Contesting imposition of penalties based on intention to evade duty.
5. Appellant's argument of bona fide belief and reliance on Supreme Court decisions.
6. Failure to file declarations and allegations of suppressing facts.
7. Interpretation of Notification No.8/2003 and duty liability payment by the appellant.
8. Allegations of intention to evade duty and suppression of facts.
9. Applicability of Section 11A(2B) and non-issuance of show cause notice.
10. Apex Court judgments on genuine belief, failure, and negligence in tax matters.
11. Setting aside penalties while upholding duty liability and interest.

Analysis:
The appeal in this case revolves around the appellant availing the small scale exemption benefit on various goods in their hospitality industry from 2003 to 2006. The department discovered an erroneous calculation of duty liability by the appellant, which was rectified by the appellant through payment with interest. A show cause notice was issued, demanding confirmation of demands, interest, and penalties under Section 11AC of the Central Excise Act, 1944. The appellant contested the penalties, arguing no intention to evade duty, citing bona fide belief and Supreme Court precedents supporting their position.

The adjudicating authority found the appellant liable for penalties, stating that being in the organized sector, they should have known the law and not availed the exemption. The first appellate authority upheld the penalties based on the failure to file declarations and allegations of suppressing facts. However, the appellant argued that the error was due to misinterpretation of the notification, which was rectified before the show cause notice was issued. The appellant's compliance with duty payment was highlighted, along with the non-issuance of a show cause notice upon self-ascertainment of duty liability.

Upon review, the tribunal noted that the appellant rectified the duty shortfall before the show cause notice, indicating no intention to evade payment. Citing Supreme Court judgments, the tribunal held that genuine belief and mere failure or negligence do not attract penalties under Section 11AC. Therefore, the tribunal set aside the penalties imposed by the lower authorities while upholding the duty liability and interest. The appeal was disposed of accordingly, emphasizing the importance of genuine belief and compliance in tax matters.