2021 (2) TMI 490 - HC - Central Excise

Deletion of penalty - validity of ignoring the explanation 1 appended to Sec.11AC for deleting mandatory penalty on respondent - whether assuming bonafides ignoring the categorical finding by the authorities below that the conduct of the respondent amounts to suppression ? - applicability of decisions reported in COMMR. OF C. EX., BANGALORE-I VERSUS GENEVA FINE PUNCH ENCLOSURES LTD. 2011 (1) TMI 746 - KARNATAKA HIGH COURT and PANASONIC AVC NETWORKS INDIA CO. LTD. VERSUS COMMR. OF C. EX., MEERUT-II 2010 (8) TMI 765 - CESTAT, NEW DELHI . HELD THAT - Section 11AC of the Act deals with penalty for short levy or nonlevy of duty in certain cases and the amount of penalty for such non-levy or short levy or non-payment or short payment or erroneous refund is in terms of Clauses (a) to (e) of the said provision. If we take a look at Clause (a) of Section 11AC, it states that where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded for any reasons other than fraud or collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of the Act or of the rules made thereunder with intent to evade payment of duty, the person who is liable to pay duty as determined under sub-section (2) of section 11A, shall also be liable to pay penalty In the case on hand, there is no allegation of fraud or collusion or wilful misstatement or suppression of facts. The revenue seeks to bring the assessee's case under the caption contravention of the provisions of the Act or the rules made thereunder. The statute further states that such contravention should be with an intent to effect payment of duty to make the person liable for payment of penalty which will be equivalent to the amount of duty payable at the relevant point of time. As stated above, the assessee has accepted the fact that they are not entitled to avail CENVAT credit without payment of CVD. Their case initially was that they have set right the mistake and reversed the credit and also remitted the interest much prior to the audit party inspection. However, this has been found factually incorrect by the Commissioner of Appeals because the credit was reversed only on 31.01.2004 and interest was remitted only on 20.02.2004 whereas the audit party visited the factory between 12.01.2004 to 14.01.2004. On realizing that a wrong statement has been given, the respondent while accepting the mistake would state that the head office of the Company is at Coimbatore and the Managing Director does not come over to Dharapuram to take case of day-to-day affairs and the employee taking note of the quantum of CVD mentioned in the EPCG license had wrongly availed the CENVAT credit - The Tribunal took note of the overall facts and circumstances of the case and found that availment of CENVAT credit without payment of CVD was done by an employee of the Company and it was a bonafide mistake. Furthermore, the Department took more than 2-1/2 years to issue show cause notice when they were fully aware that the CENVAT credit was wrongly availed by the respondent. Therefore, the finding rendered by the Tribunal on the facts and circumstances cannot be termed to be perverse for us to interfere in an appeal filed under Section 35G of the Act. The Tribunal has referred to the decision of the Karnataka High Court in the case of COMMR. OF C. EX., BANGALORE-I VERSUS GENEVA FINE PUNCH ENCLOSURES LTD. 2011 (1) TMI 746 - KARNATAKA HIGH COURT and in the case of PANASONIC AVC NETWORKS INDIA CO. LTD. VERSUS COMMR. OF C. EX., MEERUT-II 2010 (8) TMI 765 - CESTAT, NEW DELHI - On going through the facts of the said case, we find that those two decisions cannot be applied to the case on hand. Be that as it may, we do not find any substantial question of law arising for consideration in this appeal to interfere with the factual finding recorded by the Tribunal. No substantial question of law arises for consideration in this appeal - Appeal dismissed.

Summary

Issues Involved:
1. Appeal against dropping mandatory penalty.
2. Error in ignoring Sec.11AC explanation for deleting penalty.
3. Justification of assuming "bonafides" ignoring suppression.
4. Correctness of following decisions not applicable to the case.

Issue 1: Appeal Against Dropping Mandatory Penalty:
The appeal raised concerns over the Tribunal's decision to drop the mandatory penalty imposed on the respondent. The revenue questioned the correctness of this action, emphasizing the necessity of penalty imposition under Section 11AC when duty is determined under Section 11A(2). The Tribunal's discretion in quantifying penalties was also challenged based on legal precedents.

Issue 2: Error in Ignoring Sec.11AC Explanation for Deleting Penalty:
The Tribunal's decision was scrutinized for potentially overlooking the applicability of Section 11AC regarding penalty imposition for non-levy or short-levy of duty. The absence of fraud or collusion, and the requirement of intent to evade duty payment for penalty imposition, were key factors discussed in determining the correctness of the penalty deletion.

Issue 3: Justification of Assuming "Bonafides" Ignoring Suppression:
The Tribunal's assessment of the respondent's actions as a bonafide mistake, despite the authorities' view of suppression, was a focal point of contention. The respondent's explanation of a genuine error due to operational challenges was weighed against the legal provisions regarding intent and contravention for penalty imposition.

Issue 4: Correctness of Following Decisions Not Applicable to the Case:
The Tribunal's reliance on past judgments, specifically the cases of CCE Bangalore vs. Geneva Fine Punch Enclosures Limited and Panasonic AVC Networks India Company Limited vs. CCE Meerut, was questioned for their relevance to the current case. The applicability of these decisions to the factual scenario under consideration was debated, emphasizing the need for alignment with the specific circumstances of the present case.

The judgment delves into the factual background of the case, involving the respondent's availing of CENVAT credit without paying CVD, subsequent audit findings, show cause notices, and responses from the respondent and authorities. The legal arguments centered on the interpretation of Section 11AC, the presence of intent for penalty imposition, and the Tribunal's discretion in penalty quantification. The Tribunal's reasoning, based on the factual context and bonafide mistake assertion by the respondent, was a crucial aspect in the decision-making process. Ultimately, the Court dismissed the appeal, finding no substantial question of law warranting interference with the Tribunal's findings.