2018 (3) TMI 1109 - AT - Central Excise

Penalty - short payment of duty - non-inclusion of notional profit of 10% in the value of the finished goods cleared by them - Held that - This issue involves interpretation and various judgments were passed on this issue. Even the legislators also subsequently amended the rule giving a deeming fiction to the trading activity as exempted service. Therefore the issue was not free from doubt. Despite this, the appellant paid the amount - there is no mala fide intention on the part of the appellant for invoking the provisions of Section 11AC - penalty setaside - appeal allowed - decided in favor of appellant.

Summary

Issues involved: Appeal against penalty imposed under Section 11AC for short payment of duty and non-inclusion of notional profit in the value of finished goods.

Analysis:
1. Short payment of duty: The appellant in this case had short paid duty amounting to ?2,473 due to the non-inclusion of a notional profit of 10% in the value of finished goods. Additionally, they availed credit of input service used in both manufacturing dutiable goods and trading exempted goods. The appellant paid the demand based on both counts but sought to waive the penalty under Section 11AC.

2. Penalty imposition: The Commissioner (Appeals) sustained the penalty under Section 11AC, contending that there was a suppression of facts by the appellant, violating Rule 6 and valuation provisions. The Revenue representative reiterated this stance, emphasizing the appellant's contravention and the rightful imposition of the penalty.

3. Judicial consideration: Upon reviewing the submissions and records, the Member (Judicial) noted that the appellant had paid the entire demand for the normal period. The crucial issue revolved around whether the appellant needed to reverse the cenvat credit concerning the input service linked to trading goods. This matter was subject to interpretation, with various judgments and subsequent legislative amendments providing context. Despite the ambiguity, the appellant paid the amount, indicating no malicious intent in invoking Section 11AC.

4. Decision: Considering the circumstances and lack of mala fide intention, the Member (Judicial) set aside the penalty imposed under Section 11AC. The impugned order was modified accordingly, and the appeal was allowed, ultimately absolving the appellant of the penalty.

This judgment highlights the importance of assessing the intent behind non-compliance and the complexity of interpreting tax provisions, ultimately leading to the waiver of the penalty in this case due to the absence of fraudulent motives on the appellant's part.