2018 (12) TMI 1418 - AT - Central Excise

Demand of Interest and 50% penalty - payment of duty liability on being pointed out - clearance of manufactured excisable goods namely castings between the period from 10.03.2013 to 30.09.2013 - Rule 8 (3A) of the Central Excise Rules 2002 - Held that - It is found even from the SCN that assessee has discharged the duty liability much before the issue of show-cause notice and GAR detail challan - Appellant was put to show-cause notice for imposition of penalty under Section 11AC of the Central Excise Act 1994. In para 22 of the order of the adjudicating authority, he noticed no suppression of fact and only found non compliance of Rule 8 of Central Excise Rules 2002 for which he gave his finding that there is default in payment of duty which renders the appellant liable for penalty under the provision of Rule 8 (3A) of the Central Excise Rules 2002 as the Rule itself specifies such penalty which is read with Section 11AC of the Act. Penalty being a criminal remedy to set right a defaulter which is to be proved by the prosecution itself beyond all reasonable doubt, in the absence of any such finding regarding fraud, collusion, wilful misstatement or suppression of fact or contravention of the provisions of this Act or Rules penalty under Section 11AC is not attracted. The order of the Commissioner (Appeals) imposing 50% penalty on the appellant for not discharging duty liability of ₹ 26,34,931/- along with applicable interest is hereby set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
Imposition of 50% penalty and interest for non-payment of duty liability against clearance of manufactured excisable goods.

Analysis:
The case involved a challenge against the imposition of a 50% penalty and interest for non-payment of duty liability amounting to ?26,34,931 against the clearance of excisable goods. The appellant argued that due to financial crisis, the duty was not paid at the time of clearance but was reflected in the monthly returns. The appellant contended that the duty had been paid along with interest before the show-cause notice was issued, and the notice was time-barred. The appellant also challenged the penalty under Section 11AC of the Central Excise Act, citing various legal precedents to support the argument that intention to evade duty must be proved for the penalty to be imposed.

The department, represented by the ld. AR, argued that Rule 8(3A) of the Central Excise Rules 2002 applied to the appellant, and the penalty was justified under the Rule. The department justified the penalty by referring to relevant case law and rules, seeking no interference by the appellate Tribunal.

After hearing both sides and examining the case records, the Tribunal found that the appellant had discharged the duty liability before the show-cause notice was issued. The Tribunal noted that there was no suppression of facts, only non-compliance with Rule 8 of the Central Excise Rules 2002. The Tribunal accepted the appellant's contention that there was no specific time frame for discharging duty liability beyond one month without interest. The Tribunal also observed that there was no provision automatically attracting Section 11AC for violation of Rule 8(3A) of the Central Excise Rules 2002. The Tribunal emphasized that penalty under Section 11AC required proof of fraud, collusion, wilful misstatement, or suppression of fact, which was not established in this case.

Consequently, the Tribunal allowed the appeal and set aside the order imposing a 50% penalty on the appellant for non-discharge of duty liability along with applicable interest. The Tribunal concluded that in the absence of evidence of fraud or wilful violation, the penalty under Section 11AC was not warranted.

In conclusion, the Tribunal's decision provided a detailed analysis of the legal arguments presented by both parties, emphasizing the importance of proving intention to evade duty for the imposition of penalties under the Central Excise Act. The judgment highlighted the necessity of establishing fraud or wilful misstatement to justify penalties, ultimately ruling in favor of the appellant and overturning the penalty imposed by the Commissioner (Appeals).