2019 (6) TMI 7 - AT - Central Excise

Penalty u/s 11AC of the Central Excise Act, 1944 - Valuation - appellants have received certain consumables free of cost from their customers - inclusion of value of free materials in the assessable value - bonafide mistake - after the visit of the Unit, the appellant has paid-up the duty along with interest - HELD THAT - The goods were subject to leviability of duty only after 09.05.2006. The period involved in the appeal is May, 2006 to March, 2007 and it can be seen that this was transitional period, wherein, the goods were subject to duty and appellant was put with a new burden to pay of Central Excise Duty. It can be understood that the omission to include value of free supplies while arriving at assessable value was only due to bonafide mistake. There is no iota of evidence adduced by the department to establish any positive act on the part of the appellant to establish suppression of facts with intention to evade payment of duty. Therefore, the ingredients of section 11AC are totally absent in the present case. The impugned order is modified to the extent of setting aside the penalty imposed under section 11AC without disturbing the duty demand or interest thereon - appeal allowed in part.

Summary

Issues:
- Allegation of not including the value of free materials in the assessable value
- Demand of short-paid excise duty, interest, and penalties
- Confirmation of demand, interest, and penalties by the original authority
- Appeal to set aside penalties imposed under section 11AC of the Central Excise Act, 1944

Analysis:

Allegation of not including the value of free materials in the assessable value:
The appellants, manufacturers of Wooden Crates, were alleged to have received free consumables from a customer and not included their value in the assessable value for excise duty purposes. This led to a visit by the Preventive Unit and the issuance of a show-cause notice for demanding short-paid excise duty, interest, and penalties.

Demand of short-paid excise duty, interest, and penalties:
The original authority confirmed the demand, interest, and penalties, including a separate penalty on the Managing Director. The Commissioner (Appeals) upheld most of the penalties but set aside the personal penalty on the Managing Director. The appellant then appealed to the Tribunal challenging the penalties imposed.

Confirmation of demand, interest, and penalties by the original authority:
The appellant argued that they had paid the entire duty liability upon realization of the mistake and ignorance regarding the inclusion of free materials in the assessable value. The appellant contended that there was no intention to evade payment of duty, and the penalties imposed, particularly under section 11AC of the Central Excise Act, were unwarranted.

Appeal to set aside penalties imposed under section 11AC of the Central Excise Act, 1944:
The Tribunal, after considering the arguments from both sides, found that there was no evidence of suppression of facts with the intention to evade duty payment. The Tribunal noted that the omission to include the value of free supplies was a bona fide mistake, especially during a transitional period. Consequently, the Tribunal set aside the penalty imposed under section 11AC while upholding the duty demand and interest.

In conclusion, the Tribunal partially allowed the appeal, setting aside the penalty imposed under section 11AC of the Central Excise Act, 1944, without disturbing the duty demand or interest.