2024 (6) TMI 126 - AT - Central Excise

Differential Central Excise duty demand under Section 11A(4) of the Central Excise Act, 1944 - penalty for failure to pay the differential duty - extended period of limitation. Upon ascertaining the audited cost report in the month of October/November of each year and after obtaining the CAS-4 certificate indicating the actual value of such intermediate goods, the appellant discharges the differential duty with appropriate interest as per law. Sustainability of the differential Central Excise duty demand u/s 11A(4) of the Central Excise Act, 1944 - HELD THAT - There is apparent contradiction as the learned Commissioner had found that the appellant had himself worked out the duty to be paid at the time of clearance of goods to their sister units and discharged the same before clearance of such goods on the basis of available records. However, on ascertaining the actual cost of production involved during the relevant time from the final CAS-4 certificates, they had paid the differential Central Excise Duty on the value of actual cost duly determined by independent Cost Accountant and duly verified by the jurisdictional Assistant Commissioner and also paid the applicable interest thereon for the delay in payment. All the above activities are undertaken by the appellant after informing the Department about the practice in discharging their duty liability in respect of intermediate goods that arise during the course of manufacture of final products. It is not the case of the department that they knew the actual cost upon which the correct duty on intermediate goods could have been worked out, as the SCN also proposed certain addition of 15% to the base cost adopted by the appellant. There was only a different in the percentage of addition of 10% adopted by the appellant and 15% proposed in the SCN. Thus, the demand of duty by invoking the provision of Section 11A(4) of the Central Excise Act, 1944 is not sustainable. Invocation of Extended period of limitation - HELD THAT - The Co-ordinate Bench of the Tribunal in the case of SANVIJAY ROLLING ENGINEERING LTD. VERSUS COMMR. OF C. EX., NAGPUR 2022 (2) TMI 893 - CESTAT MUMBAI had held that the demand of duty invoking extended period of limitation is not invokable in case of duty demand for clearances made to its other units. Penalty - HELD THAT - The demand of differential duty invoking extended period is not sustainable and that too when the requisite duty has been paid by the appellant after duly informing the department about the same and further additional duty was also paid upon ascertaining the actual cost through CAS-4 cost audited records along with interest due for such belated payment. For the same reason, imposition of penalty under Section 11AC (1)(a) of the Central Excise Act, 1944 and imposition of penalty under Rule 25(1)(a) of Central Excise Rules, 2002 are not sustainable. Impugned order set aside - appeal allowed.

Summary

Issues Involved:
1. Sustainability of differential Central Excise duty demand u/s 11A(4) of the Central Excise Act, 1944.
2. Imposition of penalty on the appellant under the Central Excise Act and Rules.

Summary:

1. Sustainability of Differential Central Excise Duty Demand:
The appellant, engaged in manufacturing various products, adopted a practice of determining the assessable value of intermediate goods by adding 10% to the cost of production and paying duty on this provisional value. The Department objected to this practice and issued a show cause notice demanding differential duty of Rs. 78,67,377/- u/s 11A(4) of the Central Excise Act, 1944. The Commissioner adjudicated the demand to Rs. 19,07,181/- based on final CAS-4 certificates and appropriated the amount paid by the appellant along with interest. The Tribunal found an apparent contradiction in the Commissioner's findings, noting that the appellant had informed the Department of their duty payment practice and paid the differential duty based on verified CAS-4 certificates. The Tribunal concluded that there was no evidence of suppression or willful misdeclaration by the appellant, and thus, the demand of duty invoking the provisions of Section 11A(4) was not sustainable.

2. Imposition of Penalty:
The Commissioner imposed penalties on the appellant u/s 11AC(1a) and Rule 25(1)(a) of the Central Excise Rules, 2022. However, the Tribunal referred to various judgments, including the Hon'ble High Court of Gujarat in the case of Commissioner of Central Excise & Customs, Bhavnagar Vs. Saurashtra Cement Ltd., which emphasized that penalties under Section 11AC require proof of fraud, collusion, willful misstatement, or suppression of facts. The Tribunal found that the appellant had no intention to evade duty and had paid the differential duty along with interest upon finalization of CAS-4 certificates. The Tribunal also noted that the extended period of limitation for demanding duty was not applicable as the appellant had informed the Department of their practices. Consequently, the imposition of penalties was deemed unsustainable.

Conclusion:
The Tribunal set aside the impugned order to the extent of imposing penalties on the appellant and upheld the payment of additional duty and interest already made by the appellant, thus allowing the appeal in favor of the appellant.