2012 (4) TMI 161 - AT - Central Excise

Penalty Held that - the adjudicating authority has imposed a penalty of Rs.18,21,106/-under Section 11AC of the Central Excise Act, 1944 even though he has confirmed Central Excise duty of Rs.21,08,849/ - ld.Commissioner (Appeals) has imposed a penalty of Rs.2,87,743/- under Section 11AC which was conspicuously dropped by the adjudicating authority and no appeal was filed against the said adjudication order. In the circumstances, imposition of penalty of Rs.2,87,743/- under Section 11AC of the Central Excise Act, 1944 by the ld. Commissioner (Appeals) is incorrect - Decided in favor of assessee.

Summary

Issues:
- Inclusion of excise duty on plastic crates in the assessable value of glass bottles
- Imposition of penalty under Section 11AC of the Central Excise Act, 1944

Analysis:
1. Inclusion of excise duty on plastic crates in the assessable value of glass bottles:
The appellant, a manufacturer of glass bottles, availed credit of duty on plastic crates supplied by soft drinks manufacturers. The Department alleged under-valuation of glass bottles due to the exclusion of the total cost of plastic crates in the assessable value. The appellant contended they were eligible for cenvat credit on excise duty paid on the crates, citing a Supreme Court decision. The adjudicating authority confirmed the duty amount, directing recovery and imposing penalties. The Commissioner (Appeals) upheld the demand for sales tax and transportation charges but reduced the penalty under Section 11AC. The Tribunal found discrepancies in penalty imposition, noting the exclusion of duty paid by the appellant before the show-cause notice. The Commissioner's decision to exclude the excise duty element from the cost of glass bottles led to dropping the demand and penalty. The Tribunal set aside the penalty imposed by the Commissioner, partially allowing the appeal.

2. Imposition of penalty under Section 11AC of the Central Excise Act, 1944:
The adjudicating authority imposed a penalty under Section 11AC despite confirming the duty amount. The Commissioner's decision to drop the excise duty element from the cost of glass bottles resulted in the dropping of the entire demand and penalty. The Tribunal observed discrepancies in penalty imposition, as the Commissioner had imposed a penalty that was previously dropped by the adjudicating authority. Consequently, the Tribunal set aside the penalty imposed by the Commissioner, partially allowing the appellant's appeal.