2021 (12) TMI 74 - AT - Central Excise

Waiver of SCN - differential duty with interest paid before issuance of SCN - Sale of goods with brand name as well as goods without brand name - invocation of Section 11A(2B) of Central Excise Act, 1944 - HELD THAT - The Adjudicating Authority has quoted Section 11A(1)(2) of Central Excise Act, 1944 which is duly amended as per the amendment made by Finance Act, 2011. However, in the present case, the period involved is March 2008 to January 2010 therefore, the un-amended provision shall be applicable Unamended sub-Section 11(2B) shall apply for waiver of show cause notice. Therefore, there is fundamental error on the part of the Adjudicating Authority for considering wrong provision i.e. amended provision, which is effective by enactment of Finance Act, 2011. We also find that the appellant have paid entire differential excise duty along with interest. There is only minor difference in the interest amount as per Revenue even that is also in dispute as regard the correct calculation thereof. The case needs to be reconsidered - matter is remanded to the Adjudicating Authority for reconsideration and for passing de-novo order - Appeal allowed by way of remand.

Issues Involved:

1. Correctness of duty payment based on indents provided by Oil Marketing Companies (OMCs).
2. Obligation to collect differential duty on branded fuel converted by OMCs.
3. Applicability of Section 11A(2B) of the Central Excise Act, 1944 for waiver of show cause notice.
4. Justification for imposing penalty under Section 11AC of the Central Excise Act, 1944.
5. Validity of penalties imposed under Rule 26 of Central Excise Rules, 2002 on individual appellants.

Issue-wise Detailed Analysis:

1. Correctness of Duty Payment Based on Indents Provided by OMCs:
The appellant argued that the duty had been correctly paid based on the indents provided by the OMCs as per provisions of the Central Excise Act, 1944. The appellant manufactured and supplied standard Motor Spirit (MS) and High-Speed Diesel (HSD) without any brand name and paid the applicable excise duty for unbranded products. The OMCs added additives to the standardized MS and HSD at their depots and sold them under different brand names. The appellant contended that they were not informed by the OMCs about the intention to sell the goods with a brand name at the time of clearance, thus justifying the payment of duty for unbranded products.

2. Obligation to Collect Differential Duty on Branded Fuel Converted by OMCs:
The department alleged that the appellant was obligated to collect duty from the OMCs on the quantity cleared as branded fuel but purchased as unbranded. It was also alleged that the appellant continued to clear unbranded fuel to the OMCs, fully aware of the conversion to branded fuel, with an intention to evade payment of duty. The appellant argued that they had no control over the OMCs' actions post-clearance and were under no obligation to collect differential duty on fuel sold under a brand name by the OMCs.

3. Applicability of Section 11A(2B) of the Central Excise Act, 1944 for Waiver of Show Cause Notice:
The appellant contended that the matter should have been treated as closed under Section 11A(2B) of the Central Excise Act, 1944, as they had discharged the differential duty along with interest upon receipt of the same from the OMCs. The Adjudicating Authority rejected the appellant's eligibility for waiver of the show cause notice under Section 11A(1)(b) read with Section 11A(2) on the ground that part of the interest amounting to ?51,236/- was outstanding at the time of issuance of the show cause notice. The Tribunal observed that the unamended provision of Section 11A(2B), applicable to the period involved (March 2008 to January 2010), did not require payment of interest as a condition precedent for non-issuance of the show cause notice. Therefore, the case was required to be reconsidered in light of the unamended provision.

4. Justification for Imposing Penalty under Section 11AC of the Central Excise Act, 1944:
The appellant argued that no justification was provided by the respondent for imposing a penalty under Section 11AC of the Central Excise Act, 1944. The section requires evasion of duty and suppression of facts, willful misstatement, etc., for the imposition of a penalty. The appellant contended that there was no malafide on their part as the actual duty paid by the appellant was reimbursable by the OMCs, and there was no reason for them to evade excise duty. The Tribunal found that the appellant had paid the entire differential excise duty along with interest, with only a minor difference in the interest amount in dispute.

5. Validity of Penalties Imposed under Rule 26 of Central Excise Rules, 2002 on Individual Appellants:
The penalties of ?10 Lakh on Shri R.K. Jain and ?1 Lakh on Shri Nitin Angre were imposed under Rule 26 of Central Excise Rules, 2002. The appellant argued that the ingredients for invoking Rule 26 were not applicable as the individuals had no knowledge or role in the sale of fuel intended as unbranded being sold as branded fuel. The Tribunal observed that there was no proposal for confiscation of the goods and considering the overall facts and circumstances, the penalties imposed were not sustainable. Hence, the penalties on Shri R.K. Jain and Shri Nitin Angre were set aside.

Conclusion:
The Tribunal concluded that the case needed to be reconsidered in light of the unamended provision of Section 11A(2B) of the Central Excise Act, 1944. The matter was remanded to the Adjudicating Authority for reconsideration and passing a de-novo order. The appeal of the company was allowed by way of remand. The penalties imposed on Shri R.K. Jain and Shri Nitin Angre were set aside, and their appeals were allowed.

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