2005 (7) TMI 139 - AT - Central Excise

Summary

Issues:
1. Imposition of penalty under Section 11AC for delayed payment of duty on transferred capital goods.

Detailed Analysis:
The case involves two manufacturing units, 'G' and 'S', where capital goods were transferred from 'G' to 'S' without payment of duty. The Central Excise officers detected this omission, leading to the payment of duty and interest by the assessee. Subsequently, a show cause notice was issued for imposing a penalty under Section 11AC of the Central Excise Act. The original authority imposed a penalty equal to the Cenvat credit amount, which was later reduced by the Commissioner (Appeals) to Rs. One lakh. The assessee appealed against this decision (E/1203/2004), while the Revenue appealed against the penalty reduction (E/1314/2004).

Upon examination, it was found that the duty payment by the assessee was delayed for the transferred capital goods. The fortnightly payment system required duty payment by specific dates, which the assessee failed to adhere to in both instances of capital goods transfer. The assessee argued that since duty was paid before the show cause notice, no penalty should be imposed under Section 11AC. The assessee cited Tribunal decisions in support of this argument.

The Revenue contended that the imposition of a penalty under Section 11AC depends on whether there was an intent to evade duty. Reference was made to a Supreme Court judgment to support this argument. However, the Tribunal found that the delayed duty payment in this case was not a deliberate act of withholding payment with intent to evade duty. The Tribunal clarified that the fortnightly payment scheme did not provide for penalties for delayed payments, and Section 11AC was not applicable in this scenario. The Tribunal emphasized that when duty is paid before the issuance of a show cause notice, penalties are not normally imposed, aligning with established legal principles.

Consequently, the Tribunal vacated the penalty imposed on the assessee and allowed Appeal No. E/1203/2004, leading to the dismissal of the Revenue's appeal. The judgment reaffirmed the legal position that penalties are not typically imposed when duty is paid before the issuance of a show cause notice, emphasizing the importance of adherence to statutory payment timelines.