2017 (1) TMI 217 - AT - Central Excise

Valuation - whether the penalty u/r 25 is to be imposed when the value of material supplied free of cost by customer is not added to the assessable value? - The appellant admittedly paid the entire excise duty along with interest on the differential value and also waive the show cause notice. The payment of excise duty and interest has been accepted by the department and no show cause notice was issued - Held that - the appellant is squarely covered by Section 11A(2B) of the Central Excise Act 1944 - after payment of duty along with interest by the appellant the department should have concluded the matter and no penalty was imposable - penalty set aside - appeal allowed - decided in favor of assessee.

Summary

Issues involved:
Penalty under Rule 25 of Central Excise Rules for non-inclusion of value of free supply material in manufactured goods.

Analysis:

Issue 1: Penalty under Rule 25 of Central Excise Rules
The case revolved around the non-inclusion of the value of material supplied by the customer in the manufactured excisable goods, leading to undervaluation. The appellant paid the excise duty and interest on the differential value and waived the show cause notice. However, a subsequent show cause notice was issued for imposing a penalty under Rule 25 of Central Excise Rules 2002. The Commissioner imposed a penalty of ?2.5 lakhs under Rule 25 (1) (a) of Central Excise Rules. The appellant contended that they believed in good faith that the material's value was not includible in the assessable value, and there was no intention to evade duty payment. The Tribunal noted that the appellant paid the entire duty with interest without contesting the differential duty raised by the department. The Tribunal referred to Section 11A(2B) of the Central Excise Act, which allows for payment of duty based on self-ascertainment before a notice is served, and no penalty is applicable in such cases. The Tribunal held that since the appellant paid the duty and interest without contesting, the penalty was not imposable, and the impugned order was set aside, allowing the appeal.

This judgment highlights the importance of self-ascertainment of duty and payment before the issuance of a notice under Section 11A(2B) to avoid penalties under Rule 25 of Central Excise Rules. The Tribunal emphasized that when duty is paid along with interest without contesting, the matter should be concluded without imposing penalties, as per the provisions of the Central Excise Act.