2018 (11) TMI 725 - AT - Central Excise

Penalty u/s 11AC - SSI exemption - appellant did not pay any Central Excise duty on removal of the final products out of its factory premises - Held that - Due to inadvertence, the duty amount was not discharged by the appellant at the time of removal of goods from the factory. However, the appellant had issued commercial invoices, showing the VAT element for sale of final products - the department had not adduced any substantial evidence to hold that non-payment of duty by the appellant at the material time was attributable to the reason of fraud, collusion, etc., with intent to evade payment of duty. Hence, in the absence of proper substance of clandestine manufacture and removal, the charges of suppression cannot be leveled against the appellant for imposition of penalty under Section 11AC of the Act - penalty set aside - appeal allowed - decided in favor of appellant.

Summary

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

Detailed Analysis:
The appellant, engaged in manufacturing trailers, faced a demand for Central Excise duty, interest, and penalty due to clearing finished products without payment of duty. The Commissioner (Appeals) upheld the demand. The appellant did not contest the duty and interest but challenged the imposition of an equal penalty under Section 11AC. The appellant argued that the penalty provision should not apply as there was no fraudulent intent to evade duty. Referring to a statement by the Managing Director and relevant case law, the appellant contended that penalty imposition was unjustified.

The Revenue supported the penalty imposition, citing Supreme Court and Tribunal judgments. After hearing both sides, the Tribunal analyzed the case. The appellant had inadvertently not paid duty on goods removed before obtaining Central Excise registration, rectifying the error upon departmental observation. The Tribunal noted the absence of evidence supporting fraudulent intent or suppression of facts by the appellant. Relying on precedents, the Tribunal found the penalty imposition unjustified, as the circumstances did not warrant invoking Section 11AC. The Tribunal distinguished the Revenue's cited judgments, emphasizing the lack of substantiated ingredients for penalty imposition in this case.

In conclusion, the Tribunal set aside the penalty imposed on the appellant, finding no merit in the impugned order. The appeal was allowed in favor of the appellant to that extent. The Tribunal's decision was based on the absence of fraudulent intent or suppression, aligning with precedents where penalties under Section 11AC were not upheld in similar situations.