2009 (7) TMI 1047 - AT - Central Excise

Summary

Issues involved: Whether the respondent is liable to be penalized under Section 11AC of the Central Excise Act for short-paying duty with intent to evade payment.

Summary:
1. The department appealed against the decision of the Commissioner (Appeals) absolving the respondent of liability under Section 11AC. The department argued that the respondent had short-paid duty with intent to evade payment, citing delayed payment and reliance on outdated circulars. The department sought to justify the imposition of penalty under Section 11AC.

2. The respondent contended that there was no mens rea in short-paying duty, as found by the lower appellate authority. The respondent argued that the absence of mens rea was crucial and that the department had not challenged this finding in the appeal, thus invalidating the case for invoking Section 11AC.

3. Both parties cited case law to support their arguments. The department relied on a Supreme Court judgment to argue for mandatory penalty under Section 11AC, while the respondent referred to another Supreme Court decision to clarify the conditions for applying Section 11AC, emphasizing the need for mens rea.

4. The Tribunal noted that the respondent had followed an outdated circular for determining duty on medicaments, leading to short-payment of duty. The department alleged suppression of facts and intent to evade duty, resulting in the imposition of penalty under Section 11AC, which was later set aside by the lower appellate authority due to lack of mens rea.

5. The Tribunal highlighted the unchallenged finding of no mens rea by the lower appellate authority. It referenced a Supreme Court decision clarifying that Section 11AC applies only in cases of deliberate deception by the assessee with intent to evade duty, emphasizing the importance of mens rea in the application of the penalty provision.

6. The Tribunal concluded that since the finding of no mens rea was conclusive and unchallenged, Section 11AC had no application in this case. It upheld the decision of the lower appellate authority to set aside the penalty, dismissing the appeal in favor of the respondent.