2015 (11) TMI 460 - AT - Central Excise

Failure to pay duty - Clandestine removal of goods - Penalty u/s 11AC - Held that - duty, which was not paid within stipulated time period, has been paid by the appellant on their own alongwith interest and the same has been declared in ER-1 return and informed separately vide letter dated 20/10/2007. The case of the appellant is squarely covered under sub section (2B) of Section 11AC. In view of this position, the department should not have issued any show cause notice on the appellant, consequently no penalty should not have been imposed either under Section 11AC or any other rule. - In both the cases facts were, that the goods were cleared clandestinely without payment of duty, whereas fact of the present case is the goods cleared under cover of invoices. Therefore it is not a case of clandestine removal of goods; it is a case of delay in monthly payment of duty. Both the judgments are not applicable in the facts of the present case. In view of this position, I am of the considered view that lower authority neither should have issued any show cause notice nor should have imposed penalty. Therefore, impugned order is not maintainable and hence the same is set aside - Decided in favour of assessee.

Summary

Issues:
1. Delay in payment of Central Excise duty leading to imposition of penalty under Section 11AC.

Detailed Analysis:

Issue 1: Delay in payment of Central Excise duty leading to imposition of penalty under Section 11AC
The appellant, engaged in the manufacture of excisable goods, failed to pay Central Excise duty amounting to Rs. 4,98,859/- for May 2007 as per Rule 8 of Central Excise Rules, 2002. The duty was eventually paid on 27/8/2007 with interest. Similar delays occurred in June and July 2007, with duty being paid after more than 30 days. Consequently, the goods cleared in July and August 2007 without payment of duty were held liable for confiscation and penalty under Rule 25(1)(a) of the Central Excise Rules, 2002 read with Section 11AC of the Central Excise Act, 1944. The Commissioner (Appeals) upheld the penalty, leading to the appellant's appeal.

The appellant argued that they voluntarily paid the duty along with interest before any show cause notice was issued, as per sub-section (2B) of Section 11A of the Central Excise Act, 1944. They contended that since the duty details were disclosed in their monthly returns and separately intimated to the department, no penalty should have been imposed under Section 11AC. The appellant emphasized that there was no malafide intent or suppression, only a delay in payment, which was rectified promptly.

The Revenue, however, supported the penalty imposition under Section 11AC, citing Rule 8 of the Central Excise Rules, 2002, which treats delayed payments as clearances without duty payment, necessitating penalties. They relied on judicial precedents to justify the penalty imposition.

The Tribunal noted that the appellant had paid the duty along with interest before any notice was served, as per sub-section (2B) of Section 11AC, which precludes the issuance of show cause notices in such cases. The Tribunal found that the appellant's case did not involve clandestine removal of goods but only a delay in monthly duty payment, distinguishing it from the cited judicial precedents. Consequently, the Tribunal set aside the penalty imposed under Section 11AC, ruling in favor of the appellant.

In conclusion, the Tribunal allowed the appeal, emphasizing that since the duty was paid before any notice was served, no penalty should have been imposed, as the appellant's actions were in compliance with the relevant legal provisions.