2010 (3) TMI 401 - AT - Central Excise

Penalty- the appellant is a manufacturer of excisable goods such as transformer tanks, high pressure valves, pipe fittings. Show cause notice was issued to the appellants on 11-12-2006 proposing confiscation of 6 columns and also for demanding duty of Rs. 80,730/- on 18 columns and raw materials and consumables supplied totalling valued Rs. 4,94,672/- along with interest and proposing penalty. Held that- duty liability and interest not disputed. No case that goods removed without preparing any document. No mens rea involved. Submission of bonafide belief acceptable. Penalty imposed under section 11AC of Central Excise Act, 1944 set aside. Redemption fine also set aside.

Summary

Issues:
- Appeal against order of Commissioner (Appeals) regarding duty demand, penalty, and confiscation of goods.
- Movement of fabricated columns between two registered units.
- Imposition of penalty under Section 11AC of the Central Excise Act, 1944.

Analysis:
1. The case involved an appeal against the order of the Commissioner (Appeals) regarding duty demand, penalty, and confiscation of goods. The appellant, a manufacturer of excisable goods, had two units separated by a distance of about 1 km. The issue arose when columns fabricated in Unit-I using inputs with Cenvat credit were transferred to Unit-II for erection. The authorities seized columns in Unit-II, leading to a show cause notice for duty demand, confiscation, and penalty.

2. The Commissioner (Appeals) upheld the duty demand, confiscation of columns, and imposed a penalty under Section 11AC. The appellant, while not contesting the duty and interest demand, argued that the movement of columns between the registered units was technical in nature and did not warrant penalty under Section 11AC. The Department contended that the columns should have been removed from Unit-I only after payment of duty and were not eligible for Cenvat credit in Unit-II.

3. The Tribunal considered the submissions and noted that the movement of columns between the registered units was done following prescribed procedures. The appellant's belief that inter-unit movement could be made without duty payment was accepted, given the absence of mens rea and the documented nature of the transfer. The Tribunal concluded that since the movement was within the same appellant's registered units, the penalty under Section 11AC was not justified.

4. Consequently, the Tribunal disposed of the appeal by upholding the uncontested duty and interest demand, setting aside the penalty imposed under Section 11AC, and also setting aside the redemption fine imposed on the confiscated goods. The judgment emphasized the importance of procedural compliance and the absence of fraudulent intent in determining the applicability of penalties under the Central Excise Act, 1944.