2017 (2) TMI 427 - AT - Central Excise

Imposition of penalty - cost of free power supplied by HPL has to be taken into account while determining the value of gas supplied to HPL - valuation done in terms of Section 4 of the Central Excise Act, and duty with interest discharged. whether the imposition of penalty justified? - Held that - the issue of penalty hinges on the fact whether the appellant has already furnished a copy of the product supply agreement to the department at any time prior to 5.7.2000, the date of visit of the departmental officers. If this fact is confirmed, then the allegation of suppression is not justified and consequently, no penalty is imposable under Section 11AC of the Act. However, if such agreement has been recovered by the departmental officers, only at the time of visit on 5.7.2000, as has been made out in the impugned order as well as in the argument of the DR, the allegation of suppression will have to be upheld and penalty imposed fully justified - matter is remanded to the original adjudicating authority to verify the fact when the agreement came to the notice of the department and to pass a revised order in de novo proceedings - appeal allowed by way of remand.

Summary

Issues: Valuation of industrial gases supplied, imposition of central excise duty, interest, and penalty, suppression of facts, applicability of penalty under Section 11AC

Valuation of Industrial Gases Supplied:
The appeal involved a dispute regarding the valuation of industrial gases supplied by the appellant to another party. The appellant contended that the cost of free power supplied by the recipient was not considered in determining the value of the gases supplied. The central issue revolved around an agreement between the parties, where the recipient provided free power in exchange for the supply of gases. The appellant had paid the duty on the gases without factoring in the value of the free power supply, leading to a demand for differential duty and interest. The appellate tribunal upheld the demand for excise duty and interest, as the duty liability had been discharged in full along with applicable interest.

Imposition of Central Excise Duty, Interest, and Penalty:
The impugned order demanded central excise duty along with interest and imposed a penalty equal to the duty demanded on the appellant. The appellant did not contest the payment of the duty and interest but sought the setting aside of the penalty. The tribunal considered the arguments presented by both parties. The appellant argued that the penalty should be waived as the agreement with the recipient was known to the department before the investigations began. On the other hand, the Revenue opposed this plea, stating that the agreement came to light during investigations by the Directorate General of Central Excise Intelligence (DGCEI). The tribunal emphasized that the penalty hinged on whether the agreement was disclosed to the department before the investigations or only during the visit by departmental officers. The order set aside the penalty and remanded the matter to the adjudicating authority to verify when the agreement came to the notice of the department.

Suppression of Facts and Applicability of Penalty under Section 11AC:
The crux of the penalty issue was the alleged suppression of facts by the appellant regarding the agreement with the recipient. The appellant argued that since the agreement was disclosed during registration before production commenced, there was no suppression. However, the Revenue contended that the agreement was discovered during a visit by departmental officers and subsequent investigations. The tribunal highlighted the importance of establishing whether the agreement was submitted to the department before the investigations began to determine the applicability of penalty under Section 11AC. The order emphasized the need for a revised adjudication to ascertain the timing of the department's awareness of the agreement before deciding on the imposition of the penalty.

In conclusion, the appellate tribunal upheld the demand for central excise duty and interest but set aside the penalty imposed on the appellant. The matter was remanded for further proceedings to determine the timeline of the department's knowledge of the agreement, crucial in deciding the applicability of the penalty under Section 11AC.