2018 (11) TMI 812 - AT - Central Excise

Short payment of duty on the ground that assessee claimed discounts - Wilful misdeclaration and suppression of facts - demand raised invoking proviso to Sec.11A along with interest and penalty - Held that - All discounts were allowed including those which were not declared in their price declaration but which were passed on to the customers. The only discounts which were not allowed are those which the appellant has not passed on to the customers but has claimed in their invoices - there is no reason to interfere with such an extremely fair and balanced order. As assessee claimed the discounts and has not passed on the same to their customers, we find that proviso to Sec.11A has been rightly invoked and the penalty under Sec.11AC and interest under Sec.11AB have also been correctly imposed - As far as the penalty under Rule 173Q is concerned, where a penalty under Sec.11AC is imposed, the penalty under Rule 173Q cannot be imposed. Appeal allowed in part.

Summary

Issues:
- Allegation of wilful misdeclaration and suppression of facts to evade payment of duty
- Applicability of trade discounts and passing on discounts to customers
- Invocation of penalties under Sec.11AC and Rule 173Q

Analysis:

1. Allegation of wilful misdeclaration and suppression of facts to evade payment of duty:
- The appellant, a manufacturer of paints, faced allegations of wilfully misdeclaring and suppressing facts to evade duty payment.
- Authorities noted discrepancies in the discounts declared and passed on to customers, leading to a show cause notice.
- Original authority confirmed demand for duty on discounts not passed on, along with interest and penalties.
- Appellant contested the allegations, citing eligibility for deduction of trade discounts passed on to customers.

2. Applicability of trade discounts and passing on discounts to customers:
- The appellant argued for deduction of trade discounts passed on to customers, stating they paid duty for discounts not passed on.
- The Commissioner upheld the duty demand, invoking extended period, and imposed penalties under Sec.11AC and Rule 173Q.
- The Tribunal observed that all allowable discounts were already granted, except for discounts claimed but not passed on to customers.
- It was concluded that penalties under Sec.11AC and interest under Sec.11AB were rightly imposed due to the appellant's failure to pass on claimed discounts.

3. Invocation of penalties under Sec.11AC and Rule 173Q:
- The departmental representative supported the penalties imposed, emphasizing the appellant's duty shortfall due to unpassed discounts.
- The Tribunal acknowledged the correctness of penalties under Sec.11AC and interest under Sec.11AB, considering the appellant's actions.
- Notably, the Tribunal agreed with the appellant's argument that where Sec.11AC applies, penalties under Rule 173Q cannot be simultaneously imposed.
- Consequently, the penalty under Rule 173Q was set aside, while the rest of the order, including duty demand and other penalties, was upheld.

In conclusion, the appeal was mostly rejected, except for setting aside the penalty under Rule 173Q. The Tribunal upheld the duty demand, penalties under Sec.11AC, and interest under Sec.11AB, emphasizing the importance of passing on claimed discounts to customers in compliance with the law.