2019 (4) TMI 888 - AT - Central Excise

Default of payment of duty - Rule 8 of Central Excise Rules, 2002 - Suppression of facts - extended period of limitation - Held that - The present case pertains to the default of payment of duty by the appellant for two periods i.e from September 2014 to October 2015 and for the period from February 2016 to February 2017 and the total duty which has been demanded from the appellant is ₹ 20,39,822/- for both the periods with equal penalty under Section 11AC of the Central Excise Act - non-payment of duty had arisen on account of freezing of the bank account owing to the family dispute and it is only the appellant who requested the Department to recover the duties directly from their bank account as recorded in the SCN itself; thereafter, the Department recovered an amount of ₹ 17,11,244/- from the bank account of the appellant. It is a case of default in the payment of duty as per sub-Rule 4 of Rule 8, the Department has power to recover the same in the manner as they are applicable for recovery of any duty or other sums payable to the Central Government. Imposition of penalty - Held that - Circular of the Department dated 15.12.2003 also explains the position of law with regard to default in the payment of Excise Duty. Further, imposing the penalty by invoking Section 11AC of the Central Excise Act is not applicable in the present case because Section 11AC can only be applied if the provisions mentioned therein are satisfied whereas this is not the case where there is intentional evasion of duty or clandestine removal. The imposition of equal penalty under Section 11AC of the Central Excise Act is not sustainable in the facts and circumstances of this case and therefore, the imposition of penalty under Section 11AC is set aside, but since there was a default in the payment of duty, imposition of penalty of ₹ 5000/- under Rule 27 of the Central Excise Rules. Appeal disposed off.

Summary

Issues:
Imposition of penalty under Section 11AC of the Central Excise Act for default in payment of duty.

Analysis:
The case involved the appellant, a manufacturer of printed plastic and paper labels, who faced demands for unpaid duty totaling ?20,39,822 for the periods from September 2014 to October 2015 and February 2016 to February 2017, along with penalties under Section 11AC of the Central Excise Act. The appellant contested the penalty, arguing that there was no evasion or clandestine clearance of goods, and the duty default was due to freezing of their bank account during a family dispute. The appellant cited Rule 8 of the Central Excise Rules, emphasizing that duty could be recovered under Section 11 of the Act without invoking Section 11A. The appellant also referenced a CBEC Circular allowing recovery under Section 11 without issuing a Show Cause Notice for duty defaults under Rule 8.

The appellant further contended that penalty under Section 11AC is applicable only in cases involving fraud, collusion, willful misstatement, or intent to evade duty, none of which were proven in this instance. The appellant highlighted that non-filing of excise returns was not intentional contravention as duty payment was a prerequisite for filing returns. The Department recovered ?17,11,244 directly from the appellant's bank account upon request, indicating cooperation from the appellant in duty recovery. The appellant argued against the imposition of Section 11AC penalty, asserting that the extended period of five years cannot be invoked without proof of positive act or omission with intent to evade duty.

After considering the arguments, the Tribunal found that the penalty under Section 11AC was not sustainable in this case due to the absence of intentional evasion or suppression of facts. The Tribunal set aside the Section 11AC penalty but imposed a penalty of ?5000 under Rule 27 of the Central Excise Rules for the duty default. The Department was permitted to recover the remaining duty, interest, and the penalty under Rule 27. The appeal was disposed of accordingly, emphasizing the appellant's obligation to pay the outstanding duty and penalty.

This comprehensive analysis of the judgment highlights the legal intricacies involved in the imposition of penalties under the Central Excise Act and the interpretation of relevant rules and circulars in determining duty defaults and penalty applicability.