2024 (10) TMI 896 - AT - Central Excise

Levy of penalty u/s 11AC of the Central Excise Act, 1944 - non-inclusion of amortized value of the moulding machines supplied free of cost by M/s. Hanil to the appellants - HELD THAT - Entire amount of duty was paid on 31.08.2012 within three days of the visit of the officers which was on 28.08.2012 and applicable interest was paid on 10.09.2012 whereas the Show Cause Notice was issued only subsequent to payment of interest and duty which was on 28.12.2012. The provisions of Section 11A(2) of the Central Excise Act, 1944 clearly mandates that when the assessee has paid the duty along with interest and informs the Central Excise officer concerned, no notice shall be served in respect of such duty paid and no penalty is leviable under the provisions of the Act. Even otherwise, there are no justification to attribute suppression on the part of the appellant with an intent to evade payment of tax. The Ld. Lower Appellate Authority has also observed that it happened due to the ignorance of law on the part of the appellant. As the appellant has accepted the need to include the amortized cost of the capital goods supplied free of cost in the value of finished products supplied to M/s. Hanil in terms of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, appropriation of the demand of duty and interest is not interfered with. However, the impugned Order-in-Appeal No. 236/2015 (CXA-II) dated 25.08.2015 cannot be sustained only on the issue of imposition of penalty under 11AC of Central Excise 1944. The appeal is allowed.

Summary

Issues:
Imposition of penalty under Section 11AC of the Central Excise Act, 1944.

Detailed Analysis:

1. Background:
The case involves M/s. CnF Automotive India Pvt. Ltd., manufacturers of Moulded Plastic Automobile components, who were supplied with moulds by M/s. Hanil Automotive India Pvt. Ltd. The dispute arose due to the non-inclusion of the amortized value of moulding machines supplied free of cost by M/s. Hanil to the appellants.

2. Appellant's Arguments:
The appellant argued that they were not deliberately evading duty payment and had promptly paid the differential duty and interest upon being informed. They cited a Madras High Court decision emphasizing the need for a factual finding to invoke penalty under Section 11AC.

3. Revenue's Position:
The Authorized Representative supported the Lower Adjudicating Authorities' findings, advocating for the imposition of a penalty under Section 11AC due to the non-amortization of the cost of the free moulding machines.

4. Tribunal's Analysis:
The Tribunal considered the appellant's timely payment of duty and interest, invoking Section 11A(2) of the Central Excise Act, which prevents the issuance of a notice or imposition of penalties if duty is paid promptly and informed to the authorities.

5. Legal Precedent:
The Tribunal referenced a Supreme Court case emphasizing that for penalties under Section 11AC, there must be allegations of fraud, collusion, or intentional evasion of duty, which were not present in this case.

6. Decision:
The Tribunal allowed the appeal, noting that while the appellant should have included the amortized cost of capital goods in the value of finished products, the penalty under Section 11AC was not justified. The earlier order imposing the penalty was set aside.

In conclusion, the Tribunal ruled in favor of the appellant, emphasizing the importance of prompt duty payment and lack of intentional evasion in determining the imposition of penalties under Section 11AC of the Central Excise Act, 1944.