2018 (3) TMI 332 - AT - Central Excise

Penalty - short payment of duty - job-work - Held that - In failure to supply the costing data by the principal who has no locus standi inasmuch as the appellant being an assessee and liable to pay duty, appellant cannot wash out their hands from the statutory compliance of valuation provisions of the final product being manufactured. It is also observed that the appellant have also not informed the department regarding their inability to assess the value correctly due to non-supply of costing data. In such as situation, the appellant had legal option to follow the provisional assessment as provided under the law in respect of their goods which also they have failed to comply. In these circumstances, the bonafide of the appellant is not proved. Therefore, penalty under Section 11AC was rightly imposed by the lower authority. The penalty reduced to 25% in terms of proviso to Section 11AC subject to condition that the duty, interest and 25% penalty stand paid within one month from date of receipt of this order - As regard the penalty imposed under Rule 25, once the penalty under Section 11AC has been imposed, no further penalty under Rule 25 is warranted. Appeal allowed in part.

Summary

Issues:
- Appellant's liability for short payment of duty
- Application of penalty under Section 11AC and Rule 25
- Compliance with central excise law regarding valuation
- Extension of option for reduced penalty under Section 11AC

Analysis:
The case involved the appellant, a job worker, manufacturing chocolates on behalf of Cadbury India Ltd. The appellant received duty paid raw materials and costing data from Cadbury India Ltd but discovered undervaluation resulting in short payment of duty. The appellant voluntarily paid the amount with interest. Subsequently, a show-cause notice was issued seeking appropriation of the duty, interest, and penalties under Section 11AC and Rule 25 for the period of January to December 2004. The adjudicating authority confirmed the demand and imposed penalties.

The appellant contended that the short payment was unintentional due to non-supply of costing data by Cadbury India Ltd and argued against the imposition of penalties under Section 11AC. The appellant's counsel cited precedents to support their argument. The revenue authority reiterated the findings of the impugned order.

Upon careful consideration, the Tribunal noted that the appellant paid the excise duty with interest but failed to correctly value the manufactured products due to non-supply of costing data. The Tribunal emphasized that the appellant, as the job worker, was responsible for compliance with central excise laws, including valuation provisions. The Tribunal found that the appellant did not inform the department of their inability to assess the value accurately or opt for provisional assessment. Consequently, the Tribunal upheld the imposition of penalty under Section 11AC but reduced it to 25% as per the proviso to Section 11AC, citing a Supreme Court precedent for guidance.

Regarding the penalty imposed under Rule 25, the Tribunal held that once the penalty under Section 11AC was imposed, further penalty under Rule 25 was unwarranted. Therefore, the penalty of &8377; 3 lakhs under Rule 25 was set aside, and the impugned order was modified accordingly. The Tribunal partially allowed the appeal by reducing the penalty under Section 11AC and setting aside the penalty under Rule 25, subject to the condition of timely payment as specified in the order. The judgment was pronounced on 08/02/2018.