2022 (10) TMI 920 - AT - Central Excise

Levy of penalty under Section 11AC - suppression of fact or any mala fide intention on the part of the appellant or not - Debonding of unit - HELD THAT - There is no dispute about the duty and interest which were already paid by the appellant on pointing out by the audit - From the bare reading of the Section 11AC prevalent at the relevant time, it is found that in the section an exception is provided if any duty is paid within one year from the due date or the show cause notice issued covers normal period of one year, the ingredients for imposing penalty under Section 11AC is only that if the duty was not paid by reason of fraud or collusion or willful mis-statement or suppression of fact or in contravention of any of the provision of this act or rules made therein with intent to evade payment of duty. The appellant was very conscious while debonding of the unit and duty so payable on the stock of the goods as on 03.01.2008 was calculated and paid the duty on that basis. The departmental officers have issue NOC enabling the appellant to exit from EOU status however, there are some transaction of the goods from 03.01.2008 till 28.01.2008 on which also the duty by EOU was supposed to be paid. The appellant was well aware that the duty due on the stock was required to be paid for debonding of the EOU. Though, the appellant have paid the duty on the stock as on 03.01.2008 but knowing that some goods were lying from 03.01.2008 to 28.01.2008 but have not paid the duty. Once the appellant have obtained the NOC and unit was debonded, they intentionally avoided the payment of short duty. It is only on pointing out by the audit they have paid the duty, this fact clearly shows that the appellant knowing that before debonding, on all the goods lying in the factory they are required to pay the duty but they consciously not paid the duty which amounts to suppression of fact on their part. There are no infirmity in the impugned order upholding the penalty under Section 11AC therefore, the same is upheld - appeal dismissed.

Summary

Issues:
Imposition of penalty under Section 11AC for short payment of duty post debonding from EOU unit.

Analysis:
The appellant's unit, initially an EOU, underwent debonding in 2008, leading to a short payment of central excise duty on stock of goods. The appellant paid the duty and interest upon audit pointing out the discrepancy. A show cause notice was issued, confirming the duty payment and interest but imposing a penalty under Section 11AC. The appellant contested the penalty imposition, arguing lack of mala fide intent and timely demand within one year. The revenue contended that the appellant knowingly avoided paying duty on subsequent goods post-debonding, leading to penalty invocation. The adjudicating authority upheld the penalty under Section 11AC, emphasizing the appellant's suppression of facts and intent to evade duty payment.

The key question was whether the penalty under Section 11AC was justified. The adjudicating authority provided detailed reasoning for the penalty imposition, highlighting the appellant's conscious avoidance of paying duty on goods post-debonding despite being aware of the obligation. The appellant's payment upon audit discovery indicated intentional suppression of facts. The interpretation of Section 11AC revealed that penalty applies if duty evasion occurs due to fraud, collusion, willful misstatement, or suppression of facts. In this case, the appellant's deliberate non-payment post-debonding fell within these criteria, justifying the penalty under Section 11AC.

The judgments cited by the appellant were deemed inapplicable as they differed from the present case's facts. The tribunal upheld the penalty under Section 11AC, dismissing the appeal. The decision emphasized the appellant's intentional avoidance of duty payment post-debonding, aligning with the criteria for penalty imposition under Section 11AC. Ultimately, the tribunal found no error in the impugned order's penalty confirmation, leading to the dismissal of the appeal.