2018 (8) TMI 1663 - AT - Central Excise

Waiver of penalty u/s 11AC of CEA 1944 - revenue neutral situation - clearances made to sister units - Held that - Undisputedly, the clearances are made to the sister unit and the appellant would be eligible to avail the credit of the duty, if any, by paying them - the situation is revenue neutral one. There being no malafide intention to evade payment of duty, the Commissioner (Appeals) has rightly set aside the penalties imposed - appeal dismissed - decided against Revenue.

Summary

Issues:
- Appeal against penalty imposed under section 11AC of the Central Excise Act, 1944.
- Alleged undervaluation of goods cleared to sister units.
- Commissioner (Appeals) setting aside the penalty.
- Interpretation of revenue neutrality in the context of duty payment.
- Comparison of tribunal decisions in similar cases.

Analysis:

1. The appeal was filed by the Department against the penalty imposed under Section 11AC of the Central Excise Act, 1944. The case involved the respondents, engaged in the manufacture of switch gear, who were issued a show cause notice demanding duty payment on goods cleared to their sister units, alleging undervaluation by not adopting the specified percentage of the cost of production for a specific period. The original authority confirmed the demand, interest, and imposed an equal penalty. However, in appeal, the Commissioner (Appeals) set aside the penalty, noting that the clearances to sister units created a revenue-neutral situation.

2. The Department argued in the appeal, emphasizing the grounds for challenging the Commissioner's decision. The respondents, represented by counsel, highlighted the reliance placed by the Commissioner on the decision of a Larger Bench of the Tribunal and a Supreme Court judgment in a similar case. The respondents contended that the appeal by the Department should be dismissed based on the favorable precedent set by the Supreme Court in a comparable matter.

3. After hearing both sides, the Tribunal analyzed the situation and upheld the Commissioner's decision to set aside the penalty. The Tribunal considered the clearances to sister units as revenue-neutral, making the appellant eligible to avail credit of duty by paying them. Referring to previous tribunal decisions and the Supreme Court judgment, the Tribunal concluded that there was no malicious intent to evade duty payment, leading to the dismissal of the Department's appeal. The Tribunal found no justification to interfere with the Commissioner's order and upheld the decision to dismiss the appeal filed by the Revenue.

4. In the operative part of the order pronounced in open court, the Tribunal confirmed the decision to uphold the Commissioner's ruling and dismiss the Department's appeal against the penalty imposed under Section 11AC of the Central Excise Act, 1944. The judgment highlighted the concept of revenue neutrality and the absence of malafide intent in duty payment, as crucial factors in determining the outcome of the case.