2017 (11) TMI 218 - AT - Central Excise

Penalty equal to amount of duty - sub-section (5) of section 11A of the CEA, 1944 - Held that - Section 11AC of the Act has made provision to impose penalty equal to the amount of duty where duty evasion is made intentionally for any of the reasons stated in proviso to section 11A of the Central Excise Act, 1944. But Section 11A(5) shows that where no ingredients of sub-section (4) of section 11A of the said Act is present and details relating to the transactions are available on the record, in such case only, no notice shall be issued to an assessee within 5 years from the relevant date for recovery of duty and penalty equal to the amount of duty as well as interest. There are several reasons brought out by learned adjudicating authority as to unaccountal of finished goods resulting in clearance thereof without payment of duty. Burning loss was found to be abnormal; the input/output ratio was not established; the diameter of the tools and machineries were questioned; shortages of finished goods were noticed by the investigation. Present case being case of deliberate evasion, there shall be no concession in penalty. Appeal dismissed - decided against appellant.

Summary

Issues:
- Interpretation of sub-section (5) of section 11A of the Central Excise Act, 1944 regarding penalty
- Application of proviso to section 11AC for penalty imposition
- Requirement of evidence to show deliberate intention for evasion
- Comparison of decisions by different High Courts on penalty imposition
- Consideration of input/output analysis for penalty imposition
- Criteria for granting concession in penalty
- Examination of objective criteria for determining shortage of goods
- Assessment of reasons for unaccounted finished goods resulting in duty evasion

Analysis:

1. The appellant argued that as per sub-section (5) of section 11A, paying 25% of duty before receiving a show-cause notice should prevent suffering a penalty equal to the duty amount. However, the Revenue contended that full penalty could be levied for intentional duty evasion without any concession, citing a lack of evidence proving no deliberate intention to evade.

2. The Tribunal noted that Section 11AC allows for penalty equal to the duty amount in cases of intentional duty evasion as per the proviso to section 11A. It was emphasized that if no elements of sub-section (4) of section 11A are present and transaction details are available, no notice shall be issued within 5 years for duty recovery.

3. The appellant relied on a Tribunal decision for concession in penalty, while the Revenue referenced a High Court ruling stating that deliberate evasion does not warrant immunity. The input/output analysis revealed abnormal discrepancies, leading to the inference of clandestine removal due to unexplained shortages of finished goods.

4. The Tribunal highlighted that cases warranting penalty concession should be straightforward without evasion. Various High Court judgments were cited to support penalty imposition for deliberate evasion when explanations for discrepancies are unsatisfactory, emphasizing the need for evidence to justify the recorded quantities of goods.

5. The appellant's reliance on a case with no objective criteria for determining shortages was contrasted with the present situation where multiple reasons, such as abnormal burning loss and unestablished input/output ratios, indicated deliberate evasion resulting in clearance without duty payment.

6. Considering the peculiar facts establishing evasion, the Tribunal dismissed all appeals, emphasizing the lack of concession in penalty due to deliberate evasion involving unaccounted finished goods and abnormal discrepancies in the manufacturing process.