2009 (12) TMI 350 - AT - Central Excise

Demand- Penalty- The appellants submits that two issues are involved in this appeal. The first issue is regarding payment of duty, interest and penalty in respect of some perfumes cleared by the appellants as sample on which duty was not paid under the mistaken belief that the same were exempt. The appellants submits that two issues are involved in this appeal. Held that- the spent DEP is mixed with other inputs and sold as cleaning solution on which appropriate duty of excise duty is paid. Hence, the duty demand of Rs. 46,468/-, interest and penalty relating to such amount is set aside. The appeal is allowed in the above terms.

Summary

Issues:
1. Payment of duty, interest, and penalty on perfumes cleared as samples.
2. Demand of Rs. 46,468 in relation to Diethyl Phthalate (DEP).

Analysis:

Issue 1: Payment of duty, interest, and penalty on perfumes cleared as samples
The first issue in this appeal pertains to the payment of duty, interest, and penalty on perfumes cleared as samples without duty payment under the mistaken belief of exemption. The appellant does not dispute the liability for duty and interest but argues that they were not given the option to pay a reduced penalty of 25% of the duty under Section 11AC within 30 days of the adjudication order. The appellant cites case laws to support their argument. The Tribunal notes that the appellant has not contested the duty, interest, or the imposition of penalty. However, considering the cited cases where the penalty amount was reduced to 25% of the duty, the Tribunal sets aside the penalty equal to the duty amount and remands the matter for re-determining the penalty in line with the decisions of the High Courts.

Issue 2: Demand of Rs. 46,468 in relation to Diethyl Phthalate (DEP)
The second aspect of the case involves a demand of Rs. 46,468 concerning Diethyl Phthalate (DEP) used by the appellants in the manufacture of perfumes. The appellants utilize DEP for cleaning vessels between different perfume manufacturing processes and subsequently sell the spent DEP mixed with other inputs as a cleaning solution on which excise duty is paid at a lower value. The Department demands differential duty based on the credit taken on DEP versus the duty paid on the cleaning solution. The appellant argues that there is no provision under the Cenvat Credit Rules for such a demand. The Tribunal, after considering the appellant's use of DEP for cleaning vessels and selling the spent DEP as a cleaning solution, rules in favor of the appellant. The Tribunal sets aside the duty demand of Rs. 46,468, along with the interest and penalty related to that amount, as the DEP is deemed to have been used in or in relation to the manufacture of perfumes, and appropriate excise duty is paid on the cleaning solution.

In conclusion, the Tribunal allows the appeal in the terms mentioned above, setting aside the penalty equal to the duty amount in the first issue and the duty demand, interest, and penalty in the second issue. The judgment emphasizes the importance of considering relevant case laws and provisions in determining duty, interest, and penalty amounts in such cases.