2024 (3) TMI 557 - AT - Central Excise

Levy of penalty u/s 11AC of Central Excise Act, 1944 - mistake/ inadvertence - duty liability from January 2009 onwards was being discharged on lower values by applying appropriate rate of duty to value derived from CAS 4 of 2008 - HELD THAT - The appellant was not unaware of requirement to adhere to cost construction in ascertainment of value of the impugned clearance with proceedings having been initiated in 2004 against them. They had paid differential duty, too, after CAS 4 certification for 2008 having been obtained. It is apparent that they were in possession of CAS 4 certification for subsequent years and these did indicate increased cost of production with corresponding duty implications from which it can be inferred that it was the burden of such enhanced liability that prompted resort to outdated certification. No justification for such overlooking has been brought on record and here exists only plea of oversight. That the onus of countering the ingredients for resort to such penalty does not devolve on the appellant from having been aware of propensity of theirs, from experience of the past, to indulge in such evasion is neither logically acceptable nor legally tenable. However, it is on record that the appellant had, upon being prompted and before issue of notice, made good the differential duty with interest. It is also on record that credit of such duty had been enabled by issue of supplementary invoices thereafter. It is not the case of Revenue that proceedings for recovery of such credit had been initiated or concluded from which it may be inferred that entitlement to credit was undeniable. It is of no less relevance to note that, though penalty has been imposed under section 11AC of Central Excise Act, 1944, this is not an autonomous provision empowering imposition. On the contrary, devolution and extent thereof are controlled by section 11A of Central Excise Act, 1944 and implicit therein is cause and effect as set out in the recovery provision. In these circumstances, with the discharge of differential duty liability along with interest, on their own determination, by the appellant, section 11(B) of Central Excise Act, 1944 for the period upto 7th April 2011 and section 11A(3) of Central Excise Act, 1944 will come into operation to dispense with notice owing to lack of any duty or interest liability beyond that appropriated in the impugned order. Appeal is allowed by setting aside the penalty under section 11AC of Central Excise Act, 1944.

Summary

Issues involved:
The primary contention of the appellant challenges the duty liability under section 11A of Central Excise Act, 1944, along with interest and penalty imposed. The issues include the justification for exclusion from jurisdiction, differential duty leviable, compliance with CAS 4 certification, inadvertence in discharge of duty liability, and penalty imposed under section 11AC of Central Excise Act, 1944.

Challenge to Duty Liability:
The appellant contested the duty liability of Rs. 1,48,82,933 for the period January 2009 to 7th April 2011 and Rs. 1,50,23,961 for the period thereafter to July 2012 under section 11A of Central Excise Act, 1944. The dispute revolved around differential duty leviable, compliance with CAS 4 certification, and inadvertence in applying lower values for duty discharge.

Compliance with CAS 4 Certification:
The appellant's adoption of CAS 4 details pertaining to 2008 for later years came under scrutiny by central excise authorities. Upon being intimated of the requirement for furnishing certificates for each year, the appellant complied and paid the differential duty along with interest in August and September 2012. The impugned order culminated from a notice proposing recovery of duty, interest, and penalty.

Inadvertence in Discharge of Duty Liability:
The appellant contended that duty liability from January 2009 onwards was discharged on lower values by applying the appropriate rate of duty to the value derived from CAS 4 of 2008. They pleaded inadvertence for the mistake and highlighted their bona fides in discharging duty and interest in full, warranting a refund and erasure of the penalty imposed under section 11AC of Central Excise Act, 1944.

Penalty Imposed under Section 11AC:
The penalty imposed under section 11AC of Central Excise Act, 1944 was challenged on fact and jurisdictional grounds. The appellant argued against the imposition of penalty, citing lack of ingredients for invoking section 11A, absence of motive for undervaluation, and the duty liability being beyond the credit balance for duty payment as deposit. The adjudicating authority's reasoning countered these claims.

Jurisdictional Exclusion and Remedial Reparation:
The appellant's claim of jurisdictional exclusion from the authority to issue notice was contested. The contractual arrangements for assumption of pending and future liabilities were deemed insufficient to nullify the duty payment made by the appellant. The appropriateness of initiating proceedings under section 11A and the implications of delay in duty payment were analyzed in the context of contractual arrangements.

Operative Provisions and Recovery Provisions:
The impugned order segregated the operative provisions before and after 8th April 2011 due to changes in the recovery provisions under the Finance Act, 2011. The appellant's claim rested on provisions prevailing at the time of the notice, emphasizing the duty payment and information sharing requirements under section 11A of Central Excise Act, 1944. The implications of the change in recovery provisions were examined in relation to the differential duty liabilities.

Conclusion:
The appellate tribunal restricted the scope of the controversy to the penalty imposed by the adjudicating authority. With the appellant's discharge of differential duty liability and interest, sections 11B and 11A(3) of Central Excise Act, 1944 were invoked to dispense with the penalty under section 11AC. The appeal was allowed by setting aside the penalty in the impugned order.