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2017 (6) TMI 904 - HC - Central ExcisePenalty u/s 11AC - Whether the imposition of the penalty under Section11AC of the Central Excise Act is mandatory or directory? - whether the failure on the part of the Assessee to file requisite declarations and make disclosures qua clearances of waste and scrap in the returns filed in Form RT-12 would bring the case within the ambit and scope of the proviso to Section 11A(1) of the CE Act? - extended period of limitation - Held that - As is evident upon a plain reading of Section 11A of the CE Act, that the proviso incorporated therein empowers the Central Excise Officer to serve the SCN within the extended period of five years, albeit, from the relevant date, in case, any of the circumstances provided for in the main part of the Section, to which we have made a reference above, arose on account of the reason of fraud, collusion or willful mis-statement or suppression of facts or contravention of any of the provisions of the Act or the Rules made thereunder, with an intention to evade payment of duty by the noticee or his agent - the defining principle for invoking the extended period of limitation is, that there should be an intention to evade payment of duty by the noticee or his agent. The fact is that, in so far as the subject waste and scrap is concerned, there was, for a long period of time, clearly an uncertainty, as to whether or not they were excisable goods and hence, amenable to duty as claimed by the Revenue. The mere failure to make declarations/or disclosure of the clearance of waste and scrap in the returns would not amount to suppression in the given facts and circumstances - extended period not invokable. Penalty - Held that - the payment of penalty under Section 11AC of the CE Act would follow, only if, the finding of fact is returned that there was an escapement of duty, due to a conscious and deliberate wrong doing on the part of the Assessee. Thus, in other words, the penalty under Section 11AC would follow, as night follows day, only if, such a finding is returned. In other words, it will be mandatory to levy penalty only, if, such a finding is reached in the matter. In the instant case, one has not been able to arrive at such a conclusion - penalty set aside. Appeal dismissed - decided against Revenue.
Issues Involved:
1. Whether the imposition of the penalty under Section 11AC of the Central Excise Act is mandatory or directory. 2. Whether the failure to file requisite declarations and make disclosures regarding the clearances of waste and scrap in the returns filed in Form RT-12 entitles the Revenue to invoke the extended period of limitation under Section 11A of the Central Excise Act. Issue-wise Detailed Analysis: 1. Imposition of Penalty under Section 11AC: The court examined whether the imposition of penalty under Section 11AC of the Central Excise Act is mandatory or directory. The court concluded that the imposition of penalty under Section 11AC is mandatory only if there is a finding of conscious and deliberate wrongdoing by the Assessee. The court referred to the Supreme Court's judgment in Union of India v. Rajasthan Spinning & Weaving Mills, which clarified that penalty under Section 11AC can only be imposed if there is a conscious and deliberate attempt to evade duty. The court found that the Commissioner’s reasoning for imposing the penalty was deficient and did not meet the legal standards required for such a penalty. 2. Extended Period of Limitation under Section 11A: The court analyzed whether the Assessee's failure to declare clearances of waste and scrap in the returns justified invoking the extended period of limitation under Section 11A of the Central Excise Act. The court noted that the law regarding the excisability of waste and scrap was in a state of flux during the relevant period, leading to genuine doubt and confusion. The court cited several judgments and orders from various benches of the Tribunal that reflected this uncertainty. The court concluded that mere non-disclosure or failure to make declarations in the returns, under the given circumstances, did not amount to suppression with intent to evade payment of duty. The court emphasized that for the extended period to be invoked, there must be evidence of deliberate withholding of information, which was not present in this case. Additional Observations: The court observed that the Tribunal had simply affirmed the Commissioner’s view without detailed examination. The court found that the Commissioner’s order lacked substantial discussion on whether the extended period could be invoked against the Assessee. The court highlighted that the Assessee had raised debit notes for the sale of waste and scrap, indicating no intention to suppress facts from the Revenue. Conclusion: The court set aside the impugned judgment of the Tribunal, dismissed the Revenue's appeal, and allowed the Assessee's appeal. The court held that the extended period of limitation could not be invoked and that the imposition of penalty under Section 11AC was not warranted in the absence of deliberate wrongdoing. The court answered the questions of law in favor of the Assessee and against the Revenue, concluding that the extended period of limitation and the penalty under Section 11AC were not applicable in this case.
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