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TMI Blog2015 (3) TMI 737X X X X Extracts X X X X X X X X Extracts X X X X ..... ance of law. IOC, which is a public sector undertaking and admittedly coming under the Excise Control for generations, as observed by the Tribunal, should have, at the time of supply of bulk goods, informed the assessee that on repacking, duty liability has to be discharged. In this case, correct information was not disclosed to escape payment of duty. - The statement recorded from the persons and the finding of the Commissioner in the earlier and later orders clearly show that it is a case where proviso to Section 11A could be invoked. Taking note of the specific provision of Section 11AC where there is a specific mandate that the assessee shall be liable to pay penalty, the mere payment of duty even after the show cause notice is not a ground to waive penalty. Hence, the Tribunal is not justified in deleting the penalty imposed under Section 11AC of the Central Excise Act. Such a mandate under the Statute cannot be given a go-by by the Tribunal. - penalty imposed under Section 11AC is justified. Since this Court has held that the duty demand and the penalty are justified due to suppression of materials by the assessee, the consequential payment of interest on delayed payment of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equently, refilled in smaller packs as per instructions of IOC. Thereafter, as per the despatch orders issued, the respondent/assessee despatches goods packed in the containers, which are thereafter packed in cartons containing the name of IOC, viz., 'SERVO'. 3. As per Note 5 of the Tariff 38 inserted by Finance Act, 1997, repacking amounts to manufacture and as a result, the respondent is not eligible for SSI exemption as they are repacking products of IOC with the brand name 'SERVO' belonging to IOC. 4. Statements were recorded from various officers of the respondent, who clearly admitted that they had no knowledge of the same and, therefore, they did not pay duty. One Mr.K.S.Uma Shankar, Asst. Manager (Finance), Indian Oil Corporation, in his statement has stated as follows :- "For the specific question on excisability of repacked goods from bulk into small packing he admitted that they were under the impression that the repacking of bulk into smaller packs does not attract any excise duty and so he has not intimated the same to the Department. He further added that now only he came to know about insertion of chapter note 5 in Chapter 38 of the schedule t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ailed in the Annexure 'B' enclosed with this notice should not be demanded from them under Rule 9 (2) of the Rules read with the proviso to Section 11A (1) of the Act; (ii) the amount of Rs,1,51,000/- paid by M/s.PMP on 22-9-98 towards payment of duty on the stock of repacked goods available with them on the date of detection of the case, should not be adjusted towards the abovesaid demand of duty; and (iii) a penalty should not be imposed on them under Section 11AC of the Act and Rule 173Q of the Rules for the abovementioned contravention." Similar show cause notice was also issued on IOC. 8. The said show cause notice was adjudicated by the Commissioner, who held that ignorance of law is no ground to avoid payment of duty and, therefore, he held that the assessee is guilty of suppression of material facts with intent to evade payment of duty and, therefore, invoked the extended period under proviso to Section 11A. The relevant portion, as is evident from para-11, reads as follows :- "11. I have carefully gone through the records of the case. There is no dispute that repacking of Servo Kool and Hydraulic Brake Fluid from bulk packs amounted to manufacture as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and, the Commissioner adjudicated the case once over and held that the assessee does not dispute that as per Note 5 of Chapter 38 of the Central Excise Tariff, repacking of goods amounts to manufacture. The Commissioner, therefore, held that it is a clear case of suppression of fact with intentment to avoid payment of duty. However, the Commissioner, on adjudication, allowed credit of duty on goods received in bulk and taking note of the report of the Divisional Assistant Commissioner, while passed the following order, also imposed penalty under Section 11AC and interest under Section 11AB :- "15. The Divisional Assistant Commissioner in his report dated 10.04.2001 has stated that the assessees were entitled to a credit of ₹ 29,23,969/-. I am not encouraged to take a different view, in the absence of any distinguishing facts. In the light of the order of Hon'ble CEGAT, and on re-determination, the duty liability works out to ₹ 2,94,022/- after permitting the modvat eligibility of ₹ 29,23,969/- to offset against the duty remanded. 16. In view of the above, I pass the following : ORDER (a) I confirm an amount of ₹ 2,94,022/- towards duty payable o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces, the demand could not have been raised invoking larger period. Penalty could not have been imposed under Section 11AC and demand of interest could not have been made under Section 11AB in the absence of ingredients to invoke larger period." Aggrieved against the said order of the Tribunal, the appellant/Revenue is before this Court by filing the present appeal. 13. The main plank of contention of the learned standing counsel for the appellant/Department is that ignorance of law is no excuse for defaulting in payment of tax. It is the further submission of the learned standing counsel appearing for the Revenue that IOC, being a public sector undertaking and having been under Excise Control Laws time immemorial, as has been rightly accepted by the Tribunal itself, should have been well aware of the legislative changes and should have, in turn, passed on the knowledge to the assessee, which it did not do. It is submitted by the learned counsel for the Revenue that the assessee is having another unit at Bombay where they would be paying similar tax and, therefore, they cannot plead ignorance of law. On the question of invoking the larger period, it is the submission of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee has not paid the duty. It is trite law that ignorance of law cannot be a ground to avoid tax liability and to allow the appeal. There is yet another factor involved in the present case, viz., IOC being a public sector undertaking, as has been admitted by the Tribunal, is under excise control for generations. IOC has supplied goods in bulk and, therefore, show cause notice has also been issued on them. Therefore, IOC should have been well aware of the change in circumstances. In such circumstances, it should be expected that the assessee was aware of the position through IOC. Further, the assessee having an unit at Bombay, would have been aware of the changes in the law and, therefore, it cannot come before this Court and seek indulgence on the ground of ignorance of law. 17. The element of mens rea is one of the components that will be relevant for the purpose of invoking proviso to Section 11A of the Central Excise Act. In the present case, merely pleading ignorance of law, the assessee cannot wriggle out of the duty liability for the larger period. The Tribunal has been kind enough to remand the matter for de novo adjudication on a claim of Modvat credit and that has been all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n which it has been used it has to be construed strictly. It does not mean any omission. The act must be deliberate. In taxation, it can have only one meaning that the correct information was not disclosed deliberately to escape from payment of duty. Where facts are known to both the parties the omission by one to do what he might have done and not that he must have done, does not render it suppression." (Emphasis supplied) 20. In this case, IOC, which is a public sector undertaking and admittedly coming under the Excise Control for generations, as observed by the Tribunal, should have, at the time of supply of bulk goods, informed the assessee that on repacking, duty liability has to be discharged. In this case, correct information was not disclosed to escape payment of duty. 21. The main ground on which the Tribunal granted the relief being ignorance of law, this Court is of the considered opinion that the said proposition is not acceptable in law. The statement recorded from the persons and the finding of the Commissioner in the earlier and later orders clearly show that it is a case where proviso to Section 11A could be invoked. Therefore, we answer the first question of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e above it is evident that in both the appeals, orders were passed by the Tribunal on a wrong premise. In both the appeals, therefore, the impugned orders passed by the Tribunal are set aside and the matters are remitted to the respective Tribunals for fresh consideration, in accordance with law, and in the light of this judgment...." 10. In view of the categorical statement of law and taking note of the specific provision of Section 11AC where there is a specific mandate that the assessee shall be liable to pay penalty, the mere payment of duty even after the show cause notice is not a ground to waive penalty. Hence, the Tribunal is not justified in deleting the penalty imposed under Section 11AC of the Central Excise Act. Such a mandate under the Statute cannot be given a go-by by the Tribunal. We therefore, answer the question of law in favour of the Revenue. 23. The above decision postulates that on confirmation of duty, there is a specific mandate for levy of penalty under Section 11AC. In view of the above, the penalty imposed under Section 11AC is justified. Since this Court has held that the duty demand and the penalty are justified due to suppression of materials b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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