2017 (11) TMI 1379 - AT - Central Excise

Penalty u/s 11AC - duty and interest paid before issuance of SCN - Held that - even before issuance of the show cause notice, appellant had discharged the duty demand along with interest - further there was no intention to evade payment of duty - Taking note of the fact that the appellant is a public sector undertaking and also that they have paid duty demand along with interest, the imposition of penalty u/s 11AC of the Central Excise act is unjustified - appeal allowed in part.

Summary

Issues:
Imposition of penalty under section 11AC of the Central Excise Act, 1944.

Analysis:
The case involved manufacturers of petroleum products registered with the Central Excise Department who cleared products under exemption Notification No. 64/95 through Indian Oil Corporation Ltd. for consumption by the Indian Navy or coast guard. The appellants paid additional excise duty for such clearances. However, some High-Speed Diesel (HSD) meant for the Navy/Coast Guard was diverted to buyers other than eligible users, leading to a duty demand of ?1,07,75,974 along with interest and penalties. The original authority confirmed the duty demand and imposed an equal penalty under section 11AC of the Central Excise Act.

The appellant did not contest the duty demand or interest but challenged the imposition of penalty under section 11AC. The appellant's counsel argued that it was an inadvertent mistake without intent to evade duty, emphasizing that duty and interest were paid even before the show cause notice. It was highlighted that as a public sector undertaking, there was no intention to evade payment.

The Assistant Commissioner (AR) supported the findings in the impugned order, stating that the penalty was justified since the duty along with interest was not discharged before the show cause notice. After hearing both sides, the Tribunal noted that the duty demand along with interest was paid before the notice, and the appellant clarified that it was an inadvertent error without any intention to evade duty. Considering the appellant's status as a public sector undertaking and the payment made, the Tribunal deemed the penalty under section 11AC unjustified. Consequently, the order was modified to set aside the penalty while upholding the duty demand and interest. The appeal was partly allowed with consequential relief.