2018 (6) TMI 979 - AT - Central Excise

Waiver of penalty u/s 11AC - application of wrong notification - Held that - This is not a case where the appellant has cleared the goods clandestinely. However, they were clearing the goods on payment of duty applying the wrong notification at the same time they were availing the CENVAT credit. Therefore, the notification which they claimed was not admissible to them - there is no suppression on the part of the appellant. The ingredients for imposing penalty under Section 11AC was wrongly invoked - Section 11AC is not applicable hence the penalty imposed under Section 11AC is set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
Waiver of penalty under Section 11AC for non-compliance with duty notification.

Analysis:
The appellant, a manufacturing company, was clearing coal ash classified under Chapter 26 of the Central Excise Tariff Act, subject to specific duty rates based on notifications. The appellant mistakenly availed CENVAT credit and paid duty under the wrong notification. The adjudicating authority demanded duty at a higher rate and imposed a penalty under Section 11AC. The appellant appealed only for the waiver of the penalty. The Commissioner (Appeals) upheld the penalty citing the Supreme Court's ruling in Union of India v. Dharmendra Textile Processors that penalties under Section 11AC cannot be reduced. The appellant then approached the tribunal.

The tribunal noted that the appellant did not clear goods clandestinely but paid duty under the wrong notification while availing CENVAT credit. The department could have issued a show cause notice earlier based on audit findings, indicating no suppression of facts by the appellant. The appellant acknowledged the duty discrepancy and paid the demanded amount promptly. The tribunal found no suppression of facts, a crucial element for imposing penalties under Section 11AC. The tribunal distinguished the present case from the Supreme Court judgment, emphasizing the absence of suppression. Consequently, the tribunal set aside the penalty under Section 11AC, allowing the appeal on that specific issue.

The tribunal maintained the confirmation of duty and interest, emphasizing that the penalty under Section 11AC was not applicable due to the lack of suppression of facts by the appellant. The judgment clarified the specific circumstances where penalties under Section 11AC are warranted and highlighted the importance of factual suppression in such cases. The decision provided clarity on penalty imposition in excise duty cases based on compliance errors rather than intentional misconduct.