2018 (4) TMI 1158 - AT - Central Excise

Penalty u/r 26 of CER - Method of Valuation - whether under Section 4 or whether under Section 4A - Held that - There is also no doubt that the matter was mired in confusion and litigation and even now the issue is pending in the Hon ble Apex Court - just because the appellant herein had outsourced manufacture of the products to vendors, they cannot be faulted and penalized for the allegation of improper discharge of duty liability by the latter. No justification is found for imposing penalty on the appellant herein under Rule 26 of the Rules - appeal allowed - decided in favor of appellant.

Summary

Issues:
Dispute over valuation for central excise duty - Section 4 vs. Section 4A. Imposition of penalties on the appellant under Rule 26 of CER, 2002.

Analysis:
The appellant outsourced manufacturing to M/s. Cooper Bussman India Pvt. Ltd., who cleared products discharging duty under Section 4, while the department argued for Section 4A valuation. Penalties were imposed on the vendor and the appellant's Financial Controller. The Commissioner (Appeals) upheld the penalties. The appellant appealed solely against the &8377; 1,34,944 penalty under Rule 26 of CER, 2002.

During the hearing, the Taxation Manager stated that duty and penalties on the vendor and Financial Controller were paid. The appellant contested the penalty, asserting they did not abet duty evasion but were penalized due to the vendor's incorrect discharge. The appellant argued that the penalty was unwarranted.

The department supported the penalties, citing precedents where similar issues were decided against the assessee. The Tribunal noted the confusion and ongoing litigation over the valuation issue. Despite the vendor's payment of the demand and penalties, the appellant was penalized. The Tribunal found no justification for penalizing the appellant for the vendor's duty discharge error.

Consequently, the Tribunal set aside the penalty of &8377; 1,34,944 imposed on the appellant under Rule 26 of the Rules. The appeal was allowed with any consequential benefits as per law.