2017 (3) TMI 594 - AT - Central Excise

Whether a manufacture of LPG selling the product in bulk, post 1-7-2000, to an OMC for further sale in packed form to dealers/domestic consumers and recovering ex-refinery price from the OMC as sale consideration is entitled to adopt ex-storage price(APM price) as the assessable value of the said product in bulk by ignoring the provisions of Section 4 of the Central Excise Act as amended w.e.f. 1-7-2000? - whether penalty u/s 11AC of the CEA and penalty u/r 25 of Central Excise Rules, 2002 are legal and correct? Held that - SCN were issued periodically for normal period therefore there was no suppression of facts and for that reason only for every period within normal period of one year, different show cause notices were issued. Since there is no suppression of facts, the ingredient required for invoking the Section 11AC does not exist in the present case - appellant has made out fit case for waiver of penalties u/s 11AC and Rule 25 imposed by the Adjudicating authority - appeal disposed off - decided partly in favor of appellant.

Summary

Issues:
1. Whether a manufacturer of LPG can adopt ex-storage price as the assessable value post 1-7-2000, ignoring Section 4 of the Central Excise Act.
2. Imposition of penalties under Section 11AC and Rule 25 based on suppression of facts.

Analysis:

Issue 1:
The dispute revolved around whether a manufacturer selling LPG in bulk to an Oil Marketing Company (OMC) for further sale in packed form can adopt ex-storage price as the assessable value post 1-7-2000. The Larger Bench had previously ruled that the excise duty must be paid based on the transaction value collected from the OMC through commercial invoices. The differential duty demand was confirmed, leading to the current appeal. The appellant argued against penalties, citing the contentious nature of the issue and the lack of intent to evade duty due to conflicting judicial views. Various judgments were referenced to support the claim that penalties should not be imposed when the issue is debatable and there is no suppression of facts.

Issue 2:
Regarding penalties under Section 11AC and Rule 25, the Special Counsel for the Revenue contended that there was a clear intention of duty evasion as the appellant did not disclose the discrepancy between the price charged in commercial invoices and the APM price. The appellant's certification on the excise invoice was deemed false, leading to the imposition of penalties. However, the Division Bench found that as there was no suppression of facts and the issue was debatable, penalties under Section 11AC and Rule 25 were not justified. Citing various judgments, including those by the Hon'ble Supreme Court and different High Courts, it was concluded that penalties should not be imposed when there is no willful act to evade duty and when there are conflicting interpretations of the law.

In conclusion, the Tribunal set aside the penalties imposed under Section 11AC and Rule 25, partially allowing the appeals. The judgment highlighted the importance of considering the debatable nature of issues and the absence of intent to evade duty when determining the imposition of penalties in excise matters.