2018 (9) TMI 554 - AT - Central Excise

Penalty u/s 11AC of CEA - removal of capital goods after use - Rule 3(5) of Central Credit Rules, 2004 - Time Limitation - Held that - The period of dispute is January 2007 whereas the show cause notice has been issued on 13.01.2013 which is beyond the period of five years, both the authorities below imposed the penalty on the appellant under Section 11AC of the Act on the ground that there is no time limit prescribed for the lack of penalty under Section 11AC of the Act. The authorities have intentionally dragged the appellant into litigation by issuance of the show cause notice after the lapse of five years, the action of the authorities below cannot be appreciated which cause harm to the industry - As on merits, the Ld. Commissioner (Appeal), held that the duty along with interest cannot be demanded as barred by limitation, therefore, no penalty is imposable on the appellant. Penalty set aside - appeal allowed - decided in favor of appellant.

Summary

Issues: Imposition of penalty under Section 11AC of the Act, Barred by limitation, Judicial pronouncements on time limit for penalty imposition

Imposition of Penalty under Section 11AC of the Act:
The appellant, a manufacturer of excisable goods, appealed against an order imposing penalty under Section 11AC of the Act for transferring capital goods without payment of duty. The show cause notice was issued beyond the five-year limitation period, raising concerns about the validity of the penalty imposition. The appellant had already paid duty and interest on the capital goods, making the issuance of the show cause notice unnecessary. Both the lower authorities imposed the penalty disregarding the time limit for penalty imposition set by the Hon'ble Punjab and Haryana High Court in previous cases. The appellate tribunal noted the duty of authorities to follow judicial pronouncements and criticized the arbitrary actions of the department in dragging the appellant into litigation. Ultimately, the tribunal set aside the penalty imposition, considering the lack of merit in demanding penalty due to the limitation period.

Barred by Limitation:
The case revolved around the issue of limitation as the show cause notice was issued beyond the five-year period from the date of the incident in January 2007. The lower authorities acknowledged the limitation regarding the demand of duty and interest, but still confirmed the penalty under Section 11AC of the Act. The tribunal emphasized that the penalty imposition beyond the prescribed time limit was unjustifiable, especially when the appellant had already fulfilled their duty by paying the required amount along with interest. The tribunal highlighted the importance of respecting the limitation period in such cases, ultimately leading to the decision to set aside the penalty imposed on the appellant.

Judicial Pronouncements on Time Limit for Penalty Imposition:
The tribunal referenced the judicial pronouncements by the Hon'ble Punjab and Haryana High Court, which established a maximum period of five years for imposing penalties under Section 11AC of the Act. Despite the clear guidance provided by the higher court in previous cases, the lower authorities failed to adhere to the time limit, leading to an unjust penalty imposition on the appellant. The tribunal criticized the authorities for disregarding established legal precedents and highlighted the detrimental impact of such actions on the industry. By setting aside the penalty, the tribunal reinforced the importance of following judicial decisions and respecting the statutory time limits for penalty imposition to ensure fairness and justice in tax matters.

Conclusion:
The tribunal, after thorough consideration of the facts and legal principles involved, disposed of the appeal by setting aside the penalty imposed on the appellant under Section 11AC of the Act. The decision emphasized the significance of adhering to statutory time limits, respecting judicial pronouncements, and preventing unnecessary litigation that could harm the industry. The judgment serves as a reminder of the importance of upholding legal principles and ensuring fair treatment in tax-related matters.