2001 (2) TMI 711 - AT - Central Excise

Summary

Issues involved:
Challenge to correctness of duty liability confirmation, retrospective effect of penalty, reduction of penalty, applicability of penal interest, concept of loaning goods without payment of duty, procedural irregularities, bona fide belief, duty payment on removal of goods, penalty waiver plea, duty evasion intention.

Analysis:

1. Challenge to Duty Liability Confirmation:
The appeal contested the correctness of the Order-in-Appeal confirming a duty liability of Rs. 2,99,294 for the removal of inputs and capital goods without payment of duty during specific years. The Commissioner set aside the mandatory penalty under Section 11 AC due to lack of retrospective effect. The appellants argued that they had only loaned the goods to a neighboring factory and intended for them to be returned, thus denying any evasion of duty. However, the Tribunal noted the absence of evidence supporting the return of the goods to the appellant's factory, leading to the justification for upholding the duty confirmation.

2. Retrospective Effect of Penalty and Reduction of Penalty:
The penalty imposed under various rules was reduced from Rs. 1 lakh to Rs. 50,000, considering the appellant's belief that capital goods could be transferred to neighboring units. The Tribunal further reduced the penalty to Rs. 30,000 due to the company's status under the Board for Industrial and Financial Reconstruction (BIFR) and the appellant's bona fide belief, while maintaining the duty confirmation.

3. Applicability of Penal Interest and Concept of Loaning Goods without Payment of Duty:
The penal interest demanded under Section 11AB was set aside as inapplicable. The Revenue argued that once goods are removed from the factory, duty becomes payable, emphasizing that there is no provision in the Central Excise Act for loaning or lending goods without duty payment. The Tribunal concurred, stating that goods must be removed with duty payment or permission under specific rules, which the appellants failed to comply with, justifying the duty confirmation.

4. Procedural Irregularities and Bona Fide Belief:
The appellants claimed procedural irregularities in not seeking permission for transferring goods to a neighboring industry, citing a bona fide belief. However, the Tribunal emphasized that the duty payment obligation arises upon goods' removal, dismissing the plea based on the lack of formalities observed by the appellants.

5. Penalty Waiver Plea and Duty Evasion Intention:
The appellants, under BIFR, pleaded for a penalty waiver, asserting no intention to evade duty intentionally. Despite the reduction in penalty due to the company's circumstances and belief, the Tribunal rejected the appeal, maintaining the duty confirmation and emphasizing the necessity of following prescribed procedures for goods removal under the Central Excise Act.