2023 (8) TMI 182 - AT - Central Excise

Imposition of penalty under section 11AC of the Excise Act equivalent to the amount of duty - excise duty with interest had been deposited by the appellant before the issuance of the show cause notice - suppression of facts or not - HELD THAT - The appellant has given reasons as to why the excess excise duty paid by the appellant was adjusted in the excise duty payable in the month of June 2017. According to the appellant, Goods and Service Tax was introduced with effect from 1 July 2017 and the appellant believed that it was better to adjust the excess excise duty paid. The appellant has also stated that, in the facts and circumstances of the present case, it cannot be alleged that there was any suppression of facts with intent to evade payment of excise duty. The Assistant Commissioner, in the order dated 23.03.2021, has merely observed that since the appellant in reply to the show cause notice had not produced any document/proof affirming the non involvement of any fraud/collusion of tax it has to be concluded that there was involvement of fraud/collusion and so penalty could be imposed. This finding of the Assistant Commissioner is not correct. The penalty could not have been imposed if the amount with interest had been deposited before the issuance of the show cause notice but there was no intention to evade payment of excise duty. In the present case, not only had the department failed to substantiate that the appellant had suppressed facts with intent to evade payment of excise duty, but even otherwise it is not a case where it can be said that the appellant had intention to evade payment of excise duty. In such a situation, penalty could not have been imposed upon the appellant since the excise duty with interest had been deposited by the appellant before the issuance of the show cause notice - appeal allowed.

Summary

Issues involved:
The judgment involves the challenge to the imposition of penalty under section 11AC of the Central Excise Act, 1944.

Summary:

Issue 1: Imposition of Penalty
The appellant, a manufacturer of Ammonia and Urea, challenged the imposition of penalty under section 11AC of the Excise Act. The appellant argued that the excess excise duty paid was adjusted due to changes in charges and the introduction of Goods and Service Tax. The audit team discovered a shortfall in duty payment, leading to the appellant depositing the amount with interest. The Assistant Commissioner imposed the penalty, citing lack of proof of non-involvement in fraud. The Commissioner (Appeals) upheld the penalty, stating that the appellant suppressed facts with intent to evade payment. However, the appellant contended that penalty could not be imposed as the duty was paid before the show cause notice, and there was no intent to evade payment.

Issue 2: Lack of Intent to Evade Payment
The appellant, being a Central Public Undertaking, argued that there was no intention to evade payment of excise duty, as the excess duty was adjusted in good faith due to the transition to Goods and Service Tax. The appellant maintained that the burden of proof lay with the department to show intent to evade payment, which was not substantiated. The appellant had paid the duty with interest upon discovery of the shortfall, indicating no deliberate evasion.

Conclusion
The Commissioner (Appeals) erred in upholding the penalty, as there was no evidence of intent to evade payment of excise duty. The appellant's actions were in line with the transition to Goods and Service Tax, and the duty was paid promptly upon discovery of the shortfall. Therefore, the penalty under section 11AC was unwarranted, and the appeal was allowed.