2018 (6) TMI 575 - AT - Central Excise

Penalties - SSI Exemption - clubbing of clearances - Revenue neutrality - Held that - Both the units of the same company had been registered under Central Excise and had been paying central excise on clearance of their final products. Duty payable by Unit-I on clearance of kraft paper to Unit-II was available as Cenvat credit to Unit-II. In these circumstances there cannot be any intention to evade payment of duty and the situation is completely revenue neutral - the present case is squarely covered by the decision of Division Bench in the case of Hindustan Zinc Ltd. 2008 (7) TMI 214 - CESTAT NEW DELHI , where it was held that the entire excise is revenue neutral as neither the assessee stands to loose anything by paying higher duty nor the Revenue stands to gain anything by the appellant s adoption of lower assessable value - penalty u/s 11AC set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Appeal against penalty under Rule 25 of Central Excise Rules, 2002 and Section 11AC of Central Excise Act, 1944.

Analysis:
- The appellant, engaged in manufacturing Brown Kraft Paper, was found clearing goods to a sister unit without payment of duty and without maintaining records, leading to evasion of Central Excise duty.
- The Adjudicating Authority upheld the duty demand and imposed penalties under Rule 25 and Section 11AC. The Commissioner (Appeals) set aside the penalty under Rule 25 but upheld the penalty under Section 11AC.
- The appellant argued that both units were registered, paid Central Excise duty, and the transfer was revenue neutral as the duty paid by Unit-I was available as credit to Unit-II.
- Citing precedents, the appellant contended that penalty under Section 11AC was not applicable in revenue-neutral situations.
- The Revenue supported the impugned order, but the Tribunal found that the situation was indeed revenue neutral, following the decision in Hindustan Zinc Ltd. case.
- The Tribunal noted that the duty paid by the appellant was available as credit to the other unit, leading to a revenue-neutral scenario where neither party gained nor lost financially.
- Relying on the precedent and considering the circumstances, the Tribunal set aside the penalty under Section 11AC and allowed the appeal with consequential relief, if any.