2018 (6) TMI 1210 - AT - Central Excise

Penalty u/s 11AC of CEA, 1944 - SSI Exemption - Valuation of aggregate clearances - inclusion of value of exempted goods for computing the aggregate value of goods of excisable goods - Held that - The appellant is a wholly owned public sector undertaking of the Government of Karnataka and the Department conducted audit for the period June 2003 to Jun3 2005 and all the documents were supplied to the audit part and the audit party did not find that the appellant has wrongly availed the exemption. The appellant paid the entire duty when they realized that they are not entitled to the exemption - Further the appellant has not suppressed any facts from the Department and they have filed all the documents including the balance sheet, Profit & Loss Account and other documents. Since they have paid the duty and there was no intention to evade and demand is also within the normal period of limitation and the provision to Section 11AC(1) has not been invoked in the instant case - the ingredients of Section 11AC of the CEA are not present to impose penalty equal to duty. Penalty not warranted - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Challenge against penalty imposed under Section 11AC of the Central Excise Act, 1944.

Detailed Analysis:
The appeal was filed against an order passed by the Commissioner(Appeals) partially allowing the appeal of the appellant but upholding the penalty imposed under Section 11AC of the Central Excise Act, 1944. The appellant, a unit owned by the Government of Karnataka, had been availing the benefit of SSI exemption under certain notifications. However, a new notification in 2003 changed the computation method for determining eligibility for the exemption, which the appellant was unaware of. Consequently, a show-cause notice was issued, leading to the confirmation of a duty demand and imposition of penalties. The appellant challenged the order, arguing that they had not suppressed any facts and were not aware of the changes in the notification. They contended that being a public sector undertaking, there was no intent to evade payment of duty.

The appellant's counsel argued that the impugned order failed to appreciate the facts and binding judicial precedent. They emphasized that the appellant had not concealed any information from the Department and had been transparent in their financial disclosures. The counsel highlighted that the audit conducted by the Department did not raise any concerns about the appellant's eligibility for the exemption. Referring to legal precedents, the counsel contended that the intent to evade payment of duty was a crucial element for invoking penalty provisions. Citing relevant case laws, it was argued that being a government undertaking, there was no intention to evade taxes.

After hearing both sides and examining the records, the Tribunal found that the appellant, as a government-owned entity, had cooperated with the audit process and had promptly paid the duty upon realizing their ineligibility for the exemption. The Tribunal noted that there was no suppression of facts with an intent to evade payment of duty. Considering that the penalty provisions under Section 11AC required the presence of specific elements, which were absent in this case, the Tribunal held that the appellant was not liable for the penalty. Consequently, the impugned order was set aside, and the appeal of the appellant was allowed, granting them any consequential reliefs.

In conclusion, the Tribunal's decision focused on the lack of intent to evade payment of duty by the appellant, their cooperation with the audit process, and the absence of suppression of facts. By considering the specific requirements of Section 11AC for imposing penalties, the Tribunal ruled in favor of the appellant, a government undertaking, and set aside the penalty imposed under the Central Excise Act, 1944.