1999 (10) TMI 363 - AT - Central Excise

Summary

Issues:
- Imposition of penalty on the appellants for short payment of Central Excise duty.
- Interpretation of Rule 57F (1)(ii) of the Central Excise Rules regarding duty liability.
- Applicability of the Larger Bench decisions in American Auto Service and SKF Bearings India Ltd. cases.

Analysis:

1. Imposition of Penalty:
The case involved an appeal against the imposition of a penalty of Rs.50,000 on the appellants by the Commissioner (Appeals) for short payment of Central Excise duty. The Deputy Commissioner had upheld the duty demand of Rs.2,85,110 and imposed the penalty based on the appellants' admission in response to the Show Cause Notice. The appellants argued that the penalty was faulty and legally untenable, citing the Larger Bench decisions in CCE Coimbatore v. American Auto Service and SKF Bearings India Ltd. v. CCE Bangalore. The appellants contended that their agreement to pay the revised rate of duty in response to the SCN should not be the basis for imposing a penalty, as per the legal principles established in the mentioned cases.

2. Interpretation of Rule 57F (1)(ii):
The Tribunal analyzed Rule 57F (1)(ii) of the Central Excise Rules in light of the Larger Bench decision in the American Auto Service case. It was held that the duty liability of the appellants was limited to the credit availed at the rate applicable at the time of import, even if the excise duty was revised before the removal of inputs for home consumption. The legal fiction created by Rule 57F (1)(ii) deemed the user of inputs as a manufacturer for duty payment purposes, and the duty liability was restricted to the credit already utilized. Therefore, the subsequent revision of excise duty did not give rise to an additional duty liability for the appellants, as per the interpretation of the rule.

3. Applicability of Larger Bench Decisions:
The appellants relied on the Larger Bench decisions in the American Auto Service and SKF Bearings India Ltd. cases to argue against the penalty imposed. The Tribunal considered these decisions and concluded that the duty liability of the appellants was correctly interpreted based on the legal principles established in those cases. The Tribunal rejected the Department's contention of short payment of duty by the appellants and held that there was no basis for attracting penal provisions. The Tribunal also addressed the argument that the American Auto Service case was per incuriam due to not considering a Supreme Court decision, finding the two cases distinguishable and upholding the validity of the Larger Bench decision.

4. Judgment:
After considering the submissions, records, and case law, the Tribunal found merit in the appeal and set aside the impugned order. The Tribunal allowed the appeal, quashing the penalty imposed on the appellants. The judgment clarified the duty liability of the appellants under Rule 57F (1)(ii) and emphasized the restricted nature of duty payment based on the credit availed at the time of import, in line with the legal interpretations provided by the Larger Bench decisions.