2018 (2) TMI 895 - AT - Central Excise

Penalty u/s 11 A(1) of the Central Excise Act, 1944 - job-work - short payment of duty - extended period of limitation - Held that - It is true that the respondent has not paid duty at the time of clearances of intermediary goods, which resulted that they paid short duty. But when they have been pointed out by audit party, they paid duty along with interest therefore, malafide intention is missing in this case. In such circumstance, no show-cause notice was required to be issued to the respondent. The SCN is also barred by limitation. Appeal dismissed - decided against Revenue.

Summary

Issues:
Appeal against dropping of penalty under Section 11A(1) of the Central Excise Act, 1944.

Analysis:
The case involved an appeal by the Revenue against an order dropping the penalty imposed on the respondent under Section 11A(1) of the Central Excise Act, 1944. The respondent, engaged in manufacturing excisable goods, sent goods to a job worker for machining and paid duty as per Rule 8 of Valuation Rules without considering the value of the goods. Upon audit, it was discovered that duty should have been paid as per the present cost of the goods in terms of CAS 4. The appellant paid the differential duty and interest promptly. Subsequently, a show-cause notice was issued demanding duty under Section 11A(1) and imposing a penalty. The adjudicating authority appropriated the amount paid and imposed a penalty. The Commissioner (Appeals) later dropped the proceedings, leading to the Revenue's appeal.

The Revenue argued that the respondent should have paid duty as per CAS-4 at the time of clearance to the job worker, and since they did not, a penalty was warranted for suppressing facts. On the contrary, the respondent contended that upon being alerted by the audit party, they paid duty and interest under Section 11A, negating the need for further proceedings. The respondent also highlighted that the show-cause notice was time-barred due to the extended period of limitation.

After hearing both sides, the tribunal found that while the respondent had initially paid short duty, they rectified the error promptly upon being notified by the audit party. The tribunal observed the absence of malafide intent in the respondent's actions and concluded that no show-cause notice was necessary. Given that the notice was time-barred, the duty paid with interest was to be appropriated, and no additional proceedings against the respondent were warranted. Consequently, the tribunal upheld the decision of the Commissioner (Appeals) to drop the penalty, dismissing the Revenue's appeal.