2018 (11) TMI 1030 - AT - Central Excise

Extended period of limitation - penalty - deduction on account or sales tax, octroi from the sale price - Rule 9 of the Central Excise Valuation Rules, 2000 claimed in excess - Held that - The appellant had cleared post mix canisters manufactured by them to their related company claiming excess deduction on account of sales tax and octroi duty against the actual amount paid, which resulted into short-payment of duty. This short-payment came to the notice of the department on scrutiny of the records subsequently - demand invoking extended period and penalty rightly upheld. The appeal is partly allowed to the extent of allowing to discharge 25% of the penalty under Section 11AC of the Central Excise Act, 1944 subject to fulfillment of conditions prescribed under the said provision - appeal allowed in part.

Summary

Issues:
- Appeal against Order-in-Appeal No: VSK/4/Th-I/2010 dated 11/01/2010
- Short-payment of duty due to claiming excess deduction on sales tax and octroi duty
- Imposition of penalty under Section 11AC of Central Excise Act, 1944
- Eligibility for 25% penalty discharge under Section 11AC

Analysis:
The case involves an appeal against Order-in-Appeal No: VSK/4/Th-I/2010 dated 11/01/2010 passed by the Commissioner of Central Excise (Appeals), Mumbai Zone – I. The appellant, engaged in manufacturing aerated water, cleared 'post mix canisters' to their related company during the period from April 2001 to February 2003. They claimed excess deduction on sales tax and octroi duty paid by their related company, resulting in short-payment of duty. A demand notice was issued for recovery of the duty short-paid along with interest and penalty. The appeal was filed after the Learned Commissioner (Appeals) rejected their appeal, leading to the present appeal.

The appellant argued that there was no intention to claim the excess deduction, as the tax amount was initially deducted on a percentage basis. They contended that there was no mala fide intention in not paying the applicable duty. On the other hand, the Authorized Representative for Revenue supported the findings of the Learned Commissioner (Appeals), stating that the appellant consistently short-paid duty by declaring more deduction than admissible on account of sales tax and octroi duty. The penalty equal to the duty short-paid was imposed under Section 11AC of the Central Excise Act, 1944.

Upon hearing both sides and examining the records, it was established that the appellant had indeed claimed excess deduction on sales tax and octroi duty, leading to short-payment of duty during the mentioned period. The department noticed this discrepancy during record scrutiny. The Tribunal found merit in confirming the demand short-paid and imposing a penalty equal to the duty confirmed, invoking an extended period of limitation.

However, it was noted that the benefit of discharging 25% of the penalty under Section 11AC of the Central Excise Act, 1944 was not extended to the appellant by the lower authorities. Consequently, the appellant was deemed eligible for this benefit, subject to fulfilling the conditions specified under the said provision. Therefore, the impugned order was modified, and the appeal was partly allowed to the extent of permitting the discharge of 25% of the penalty under Section 11AC, provided the prescribed conditions were met.

In conclusion, the appeal was partly allowed, and the appellant was granted the benefit of discharging 25% of the penalty under Section 11AC of the Central Excise Act, 1944, subject to meeting the specified conditions.