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2019 (2) TMI 1020 - AT - Central ExciseShort payment of duty - confirmation of the demand of duty short paid by invoking proviso to Section 11A(1) of the Central Excise Act, 1944 - demand of interest and penalty as well - intent to evade present or not - revenue neutrality - extended period of limitation - collecting the duty from their customers but not depositing the same with the revenue by the due date. Held that - There appears to be no dispute that Appellants have not paid the duty demanded at the relevant time and hence short paid the duty to that extent. In case of non/ short payment of duty, Section 11A of the Central Excise Act, 1944 automatically comes into picture and demand is made in terms of that section, to recover the duty so short paid. In case the duty is paid after the relevant date the same gets adjusted by application of the section. In the present case the period of demand is from April 2003 to November 2005 (Unit-1) and April 2003 to March 2006 (Unit-2). The argument about system glitch in SAP-ERP system of the Appellants for such a long period do not appear to be justified. The appellants were issuing the invoices and collecting the duty from their customers but not depositing the same with the revenue by the due date. This itself shows the malafide intention of the appellants. Benefit of reduced penalty - Held that - Since in the present case the order is dated 18.08. 2010 and has been received by the Appellants on 27.08.2010 and appellants have deposited the 25% of penalty before filing of the appeal on 18.08.2010. Adjudicating authority should have extended the benefit of payment of penalty of 25% of duty demanded in his order as per the first proviso to section 11AC. Since the appellant has made payments as per the proviso to the section 11AC the benefit of proviso should have been allowed to them. Appeal allowed in part.
Issues Involved:
1. Demand of duty and interest under Section 11A(2) and Section 11AB of the Central Excise Act, 1944. 2. Imposition of penalty under Rule 25 of the Central Excise Rules, 2002 read with Section 11AC of the Central Excise Act, 1944. 3. Applicability of Section 11AC when duty is paid before the issuance of the Show Cause Notice. 4. Revenue neutrality of transactions between Unit 1 and Unit 2. 5. Malafide intention and system glitches in SAP-ERP system. Issue-Wise Detailed Analysis: 1. Demand of duty and interest under Section 11A(2) and Section 11AB of the Central Excise Act, 1944: The Commissioner confirmed the demand of duty amounting to ?54,99,975.00 for the period April 2003 to March 2004, ?1,04,44,742.00 for the period April 2004 to March 2005, and additional amounts for subsequent periods. The amounts were appropriated against the sums already paid by the assessee. Interest payable under Section 11AB was also confirmed and appropriated. The Tribunal noted that the appellants had not paid the duty demanded at the relevant time, thus short-paying the duty, which justified the invocation of Section 11A for recovery. 2. Imposition of penalty under Rule 25 of the Central Excise Rules, 2002 read with Section 11AC of the Central Excise Act, 1944: Penalties were imposed on the assessee for various amounts corresponding to the duty demands. The Tribunal held that the imposition of penalties under Section 11AC was justified due to the malafide intention of the appellants, as they were issuing invoices and collecting duty from customers but not depositing the same with the revenue by the due date. The Tribunal referenced the decisions of the Bombay High Court and the Supreme Court, which mandated that penalties under Section 11AC are co-extensive with the duty determined under Section 11A(2). 3. Applicability of Section 11AC when duty is paid before the issuance of the Show Cause Notice: The appellants argued that since they had paid the entire duty along with interest before the issuance of the Show Cause Notice, Section 11AC should not apply. However, the Tribunal rejected this argument, citing the decision in Union of India v. Dharamendra Textile Processors, which held that the mere payment of duty before the issuance of the Show Cause Notice does not alter the liability for penalty. The Tribunal emphasized that the determination of duty under Section 11A(2) is necessary, and penalties under Section 11AC are mandatory once the duty is determined. 4. Revenue neutrality of transactions between Unit 1 and Unit 2: The appellants contended that the transactions between Unit 1 and Unit 2 were revenue neutral, as the duty paid by one unit was available as CENVAT credit to the other. The Tribunal acknowledged this argument but held that the revenue neutrality does not absolve the appellants from the liability of penalties, especially when there was a clear short payment of duty and malafide intention involved. 5. Malafide intention and system glitches in SAP-ERP system: The appellants claimed that the short payment of duty was due to a system glitch in their SAP-ERP system and that there was no malafide intention. However, the Tribunal found this argument unconvincing, given the long period of non-payment and the fact that the appellants were passing on CENVAT credit to their buyers without actually depositing the duty. This indicated a clear malafide intention to evade payment of duty. Conclusion: The Tribunal partially allowed the appeal by extending the benefit of the proviso to Section 11AC, which allows for a reduced penalty of 25% of the duty demanded if paid within thirty days from the date of communication of the order. The Tribunal modified the Commissioner's order to extend this benefit to the appellants, as they had complied with the conditions of the proviso by paying 25% of the penalty before filing the appeal.
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