2018 (11) TMI 70 - AT - Central Excise

Penalty u/s 11AC of CEA - suppression of vital facts in the ER-1 returns with intent to evade payment of duty or not - Held that - The Adjudicating Authority has not imposed any penalty on the appellant under Section 11AC of the Act, by observing that non-payment of duty immediately on manufacture was bona fide mistake on their part and it is a case where proviso to Section 11A is not applicable in facts and circumstances of the case. If the party has filed Nil ER-1 it was because there was no physical manufacture or clearance of goods in their factory - appeal dismissed - decided against Revenue.

Summary

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

Analysis:
The judgment pertains to an appeal filed by the Revenue against an order of the Commissioner confirming a duty demand and imposing a penalty under Rule 25 of the Central Excise Rules, 2002, but not under Section 11AC. The Adjudicating Authority did not impose the penalty under Section 11AC, citing that it can only be imposed if the proviso to Section 11A(1) sustains. The appellant, a new unit, argued that the duty lapse was due to a mistaken belief that duty was payable by the raw material supplier, not them as a job worker. The Authority found merit in the appellant's plea, considering their newness, lack of awareness, and reliance on the raw material supplier for guidance. The Authority also referenced legal precedents emphasizing the necessity of intention to evade duty for penalty imposition under Section 11AC. As the appellant rectified the duty payment upon notification and paid interest, the Authority concluded that the penalty was not warranted under Section 11AC.

The judgment extensively discusses the legal principles governing the imposition of penalties under Section 11AC, emphasizing the requirement of intentional evasion of duty for penalty imposition. It cites judicial decisions highlighting that mere evasion of duty is insufficient, and there must be a deliberate intent to evade payment. The judgment underscores that penalties under Section 11AC are applicable when duty evasion occurs through fraud, collusion, willful misstatement, suppression of facts, or contravention of laws with the intent to evade payment. Notably, the judgment emphasizes that the absence of these elements, coupled with the assessee's proactive duty payment and cooperation with authorities, negates the necessity for imposing the mandatory penalty under Section 11AC. By referencing legal precedents and interpreting the statutory provisions in light of the facts at hand, the judgment upholds the Adjudicating Authority's decision to not impose the penalty under Section 11AC in the present case.

In conclusion, the appellate tribunal, after considering the arguments presented by the Revenue and the detailed reasoning provided by the Adjudicating Authority, upheld the decision to reject the Revenue's appeal. The tribunal concurred with the Authority's analysis that in the absence of justifiable reasons to interfere with the order, the imposition of penalty under Section 11AC was not warranted. The judgment underscores the importance of establishing deliberate intent to evade duty for the application of penalties under Section 11AC, aligning with legal precedents and statutory provisions governing such penalties.