2012 (11) TMI 434 - AT - Central Excise

Penalty - Area based exemption - whether the Education Cess and secondary and higher Education Cess would get covered under the said notification so as to result in automatic refund to the assessee Held that - During the relevant period i.e. January, 2008 to April, 2008, declaration of law by the Tribunal was in favour of the assessee. It was only subsequently in 2009 that the earlier order of the Tribunal was overruled by Division Bench and it was held that the assessee located in the area of Jammu and Kashmir would not get the benefit of Notification No. 56/2002 in respect of Education Cess and secondary and Higher Education Cess - when there are divergent views of the higher authorities on the issue and assessees act on the basis of said views, therefore cannot be held guilty for mala fide breach penalty set aside - in favour of assessee

Summary

Issues:
Interpretation of Notification No. 56/02 regarding Education Cess and secondary and higher Education Cess coverage.
Imposition of penalty under Section 11AC of the Act based on conflicting Tribunal decisions.

Issue 1 - Interpretation of Notification No. 56/02:
The case involved a dispute regarding whether Education Cess and secondary and higher Education Cess would be covered under Notification No. 56/02, which provides for automatic refund of duty paid by a manufacturing unit in Jammu and Kashmir. Lower authorities denied the benefit of the notification to the appellants, resulting in the confirmation of duty and imposition of penalty.

Analysis:
The appellants, situated in Jammu and Kashmir, were availing benefits under Notification No. 56/02, which required duty payment by a manufacturing unit, automatically abated as a refund. The dispute centered on the inclusion of Education Cess and secondary and higher Education Cess under this notification. Lower authorities ruled against the appellants, leading to the confirmation of duty and penalty imposition.

Issue 2 - Imposition of Penalty based on conflicting Tribunal decisions:
The appellants contested the penalty imposition under Section 11AC of the Act, citing conflicting Tribunal decisions. The advocate referred to a Single Member Bench order supporting the inclusion of Education Cess under the notification, which was later overruled by a Division Bench in a different case. The advocate argued that during the relevant period, the law favored the appellants, and no mala fide intent could be attributed to them for availing the cess benefits.

Analysis:
The advocate highlighted the conflicting Tribunal decisions, with a previous order supporting the appellants' position being overturned by a Division Bench. The advocate argued that since the law was in favor of the appellants during the relevant period, they should not be penalized for availing the cess benefits. Citing a Tribunal decision in a similar case, the advocate emphasized that when higher authorities have divergent views, assessees acting based on those views cannot be deemed to have acted with mala fide intent.

Judgment:
The Tribunal, considering the absence of contrary judgments and the favorable legal position during the relevant period, decided not to impose any penalty on the appellants. The penalty was set aside, while the demand and interest were confirmed as unchallenged. The stay petition and appeal were disposed of accordingly.