2013 (1) TMI 443 - AT - Central Excise

Demand - Captive consumption - Penalty u/s 11AC - Whether the wet starch , which is an intermediate product, emerges during the course of manufacture of final product Sago , which is exempted from payment of duty is liable to excise duty or not - Held that - Following the decision in case of SHRI VARALAKSHMI CO. (2008 (8) TMI 661 - CESTAT, NEW DELHI) affirmed by the Hon ble apex court. The issue is no longer res integra , therefore, the appellants are not liable to pay duty on wet starch captively consumed in the manufacture of final product - Sago , which is exempted from duty Penalties are imposed u/s 11AC on account of non-payment of duty in time. The appellants were pursuing with the Ministry for making the product exempted from duty, therefore, the ingredients of Section 11 AC i.e., fraud, collusion, willful mis-statement, suppression of facts all contravention of the provisions of the Act and Rules thereunder with intent to evade duty are missing, therefore, penalty u/s 11AC is not imposable - In favour of assessee

Summary

Issues:
1. Liability of duty on 'wet starch' captively consumed in the manufacture of exempted final product 'Sago'.
2. Imposition of penalty under Section 11AC of the Central Excise Act, 1944.

Analysis:
1. The appellants, M/s. Venkatachalapathi Rice and Sago Factory, contested against the demand of duty on 'wet starch' emerging during the production of 'Sago', an exempted final product. The Tribunal referred to a previous case and a subsequent apex court decision, concluding that duty on 'wet starch' captively consumed in the manufacturing of 'Sago' exempted from duty is not applicable. Hence, the appellants are not liable to pay duty on 'wet starch'.

2. In the case of penalties imposed under Section 11AC on M/s. Venkatachalapathi Rice & Sago Factory and M/s. Dhanalakshmi Sago Factory for delayed duty payment, the Tribunal found that the appellants were actively seeking exemption for the product from duty. As there was no evidence of fraud, collusion, willful misstatement, or intent to evade duty, the Tribunal ruled that penalty under Section 11AC was not justified. Consequently, the appellants' appeals were allowed, and the Revenue's appeals were dismissed.