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TMI Blog2009 (8) TMI 1057X X X X Extracts X X X X X X X X Extracts X X X X ..... been paid after detection of the shortage by the department but before issuance of show cause notice in view of the facts and circumstances mentioned above?" 2. Before answering the aforesaid question, few facts necessary for disposal of the appeal may first be noticed. M/s. Maruti Udyog Limited (for brevity' 'dealer' are engaged in the manufacturing of motor vehicles and their parts falling under Chapter Heading 8702 and 8708 respectively of the Central Excise Tariff Act, 1985. The dealer was also availing Modvat/Cenvat credit of duty paid on the inputs used in the manufacturing of motor vehicles under Rule 57AB of the Act. They were served with a show cause notice dated 28-6-2001 alleging that a large number of parts manufactured by the dealer had been cleared without payment of central excise duty. In para 15 it was alleged that the dealer had removed/cleared IN HOUSE parts worth over rupees one crore, without payment of duty amounting to Rs. 16,53,011.73 during the period 1996-97 to 1999-2000. It was also alleged that the dealer had contravened provisions of Rule 52-A, 173-F and 173-G of the Act, because the IN HOUSE parts manufactured by the dealer were cleared without any v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts with an intention to evade the payment of duty as contemplated under Section 11AC. It was submitted that non-payment of duty was on account of : (a) incorrect accountal of the IN HOUSE parts transferred to spare parts' division, which lead to various discrepancies and (b) difference in book balance as compared to the physical stock. The dealer submitted that consequent upon the transfer of their Modvat cell to the Finance Division in January, 1999, the dealer had undertaken physical stock verification which lead to discovery of discrepancies. Accordingly, a detailed verification drive was undertaken by the dealer to reconcile the discrepancy. It was found that there existed some mismatch on the IN HOUSE parts transferred to the spare parts' division. On finding the discrepancies, as already noticed, the dealer deposited the amount of duty in October, 2000 and on 5-6-2001, under intimation to the departmental authorities. The Tribunal allowed the appeal by following the principles that if duty has been paid prior to the issuance of show cause notice, then the provisions of Sections 11AB and 11AC would not be attracted and various judgments on that issue were followed and appli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dered in the dealer's own case namely "Maruti Udyog Ltd. v. CCE, Delhi" 2004 (173) E.L.T. 382. In the aforesaid order of the Tribunal, the facts were that "There was shortage of input noticed and the appellant could not show that the inputs on which the credits had been availed, were properly disposed of as per requirement of Rules." The demand was on account of fact that there were some shortages which did not concile. The Tribunal also noticed that full reconciliation of the inputs used in the manufacturing was not possible and it was no ground to hold that the goods have been improperly disposed of. It also accepted the factual position projected by the dealer that the dealer has been following a detailed and reliable system of accounting inputs which take into account all aspects, including pilferage and whenever the inputs have been disposed of by any other mode than in the manufacture and final products, the dealer has reversed Modvat credit. Apart from the aforesaid self-serving statements made by dealer the Tribunal felt persuaded by its self-harming statement. The dealer had stated that there were unaccounted excess inputs which were worth more than Rs. 17 crores in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itself and concluded that once the findings are that certain shortages and excesses are normal in such a huge business concern, then no intention to evade the duty by playing fraud, misstatement and suppression of facts could be imputed and inferred. Consequently, the interest, as envisaged by Section 11AB and penalty by Section 11AC of the Act, would not be applicable. 8. The Revenue has challenged the aforesaid view of the Tribunal once again primarily by placing reliance on a recent judgment of the Hon'ble Supreme Court rendered in the case of "Union of India & ors. v. Dharamendra Textiles Processors & ors", 2008 (306) ITR 277 (S.C.). = 2008 (231) E.L.T. 3. Mr. Sanjeev Kaushik, learned counsel for the Revenue has argued that penalty under provisions of Section 11AC is a civil liability and therefore, wilful concealment or dishonest intention would not constitute an essential ingredient for attracting civil liability. Placing reliance on the observation made in para 13 of the judgment, learned counsel has submitted that no mens rea would be required as an essential ingredient to attract Section 11AC of the Act. According to learned counsel, the judgment in Dharamendra Textile's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who is liable to pay duty as determined under sub-section (2) of section 11A, shall also be liable to pay a penalty equal to the duty so determined : Provided that where such duty as determined under sub-section (2) of section 11A, and the interest payable thereon under Section 11AB, is paid within thirty days from the date of communication of the order of the Central Excise Officer determining such duty, the amount of penalty liable to be paid by such person under this section shall be twenty-five percent of the duty so determined: Provided......... Provided......... Provided........." 12. The aforesaid provision has been read with sub-section (1) of Section 11A as the same expressions have been used in both the Sections. Accordingly, in paras 18 and 19, the following conclusion has been reached by the Hon'ble Supreme Court : "18. One cannot fail to notice that both the proviso to sub-section (1) of Section 11A and Section 11AC use the same expressions: "by reasons of fraud, collusion or any willful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the Rules made thereunder with intent to evade payment of duty,...". In other w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , their Lordships observed in para 21 of the latter judgment that they could not see as to how "the decision in Dharamendra Textiles case can be said to hold that Section 11AC would apply to the other case of non-payment or short payment of duty regardless of the conditions expressly mentioned in the Section for its application." It was further observed that in Dharamendra Textiles case even the Revenue has not taken that stand and in that regard, submissions made in para 5 of that judgment were noticed by their Lordships in Rajasthan Spinning and Weaving Mills case (supra). The Hon'ble Supreme Court accordingly held as under : "23. The decision in Dharamendra Textile must, therefore, be understood to mean that though the application of Section 11AC would depend upon the existence or otherwise of the conditions expressly stated in the section, once the section is applicable in a case the concerned authority would have no discretion in quantifying the amount and penalty must be imposed equal to the duty determined under sub-section (2) of Section 11A. That is what Dharamendra Textile decides. 24. It must, however, be made clear that what is stated above in regard to the decision i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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