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TMI Blog2019 (2) TMI 1020X X X X Extracts X X X X X X X X Extracts X X X X ..... (Unit-2). The argument about system glitch in SAP-ERP system of the Appellants for such a long period do not appear to be justified. The appellants were issuing the invoices and collecting the duty from their customers but not depositing the same with the revenue by the due date. This itself shows the malafide intention of the appellants. Benefit of reduced penalty - Held that:- Since in the present case the order is dated 18.08. 2010 and has been received by the Appellants on 27.08.2010 and appellants have deposited the 25% of penalty before filing of the appeal on 18.08.2010. Adjudicating authority should have extended the benefit of payment of penalty of 25% of duty demanded in his order as per the first proviso to section 11AC. Since the appellant has made payments as per the proviso to the section 11AC the benefit of proviso should have been allowed to them. Appeal allowed in part. X X X X Extracts X X X X X X X X Extracts X X X X ..... ixty Seven Thousand Three Hundred and Fifty Three) paid by the assessee, against the amount confirmed in (ix) above. xi. I also confirm and appropriate the amount of ₹ 9,95,941.00 (Rs. Nine Lakhs Ninety Five Thousand Nine Hundred and Forty One) separately paid by the assessee against interest payable under Section 11AB of the Central Excise Act, 1944. xii. I also impose a penalty of ₹ 18,67,353.00 (Rs. Eighteen Lakhs Sixty Seven Thousand Three Hundred and Fifty Three) on the assessee, under Rule 25 of the Central Excise Rules 2002 read with Section 11AC of the Central Excise Act, 1944. xiii. I confirm the demand of ₹ 49,76,844.00 (Rs. Forty Nine Lakhs Seventy Six Thousand Eight Hundred and Forty Four) and Cess amounting to ₹ 63,329.00 (Rs. Sixty Three Thousand Three Hundred and Twenty Nine) for the period April 2004 to March 2005 (clearances of semi-finished goods from Unit 1 to 2) under Section 11A (2) of the Central Excise Act, 1944. xiv. I appropriate the amount of ₹ 49,76,844.00 (Rs. Forty Nine Lakhs Seventy Six Thousand Eight Hundred and Forty Four) and Cess amounting to ₹ 63,329.00 (Rs. Sixty Three Thousand Three Hundred and Twenty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... impose a penalty of ₹ 9,02,463.00 (Rs. Nine Lakhs Two Thousand Four Hundred and Sixty Three only) on the assessee, under Rule 25 of the Central Excise Rules 2002 read with Section 11AC of the Central Excise Act, 1944. xxv. I confirm the demand of ₹ 1,79,64,520.00 (Rs. One Crore Seventy Nine Lakhs Sixty Four Thousand Five Hundred and Twenty only) and Cess amounting to ₹ 3,33,592.00 (Rs. Three Lakhs Thirty Three Thousand Five Hundred and Ninety Two only) for the period April 2004 to March 2005 (clearances of goods from Unit No.2) under Section 11A(2) of the Central Excise Act, 1944. xxvi. I appropriate the amount of ₹ 1,79,64,520.00 (Rs. One Crore Seventy Nine Lakhs Sixty Four Thousand Five Hundred and Twenty only) and Cess amounting to ₹ 3,33,592.00 (Rs. Three Lakhs Thirty Three Thousand Five Hundred and Ninety Two only) paid by the assessee, against the amount confirmed in (xxix) above. xxvii. I also confirm and appropriate the amount of ₹ 39,48,615.00 (Rs. Thirty Nine Lakhs forty Eight Thousand Six Hundred and Fifteen only) separately paid by the assessee against interest payable under Section 11AB of the Central Excise Act, 1944. xxviii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th reference to recovery of a sum of ₹ 33,27,780.00 (Rs. Thirty Three Lakhs Twenty Seven Thousand Seven Hundred Eighty only) and cess amounting to ₹ 57,209.00 (Rs. Fifty Seven Thousand Two Hundred and Nine only) for the period 2003-04, 2004-05 and 2005-06 (towards CENVAT credit wrongly availed by Unit No.1) as referred to in Para 28 to the Show Cause Notice and the consequential demands with reference to Para 28(F) of the Notice. Consequently invoking Rule 13 and Rule 3(4) of the CENVAT Credit Rules, 2002 will not apply. xxxvii. Penal proceedings against Shri C.G. Ramkrishnan, Director & COO are dropped." 2.1 Appellants are having two units designated as Unit 1 (Plot No E-1/2/3, MIDC Taloja) and Unit 2 (Plot No C-2, MIDC Taloja) wherein they are undertaking the manufacture of pre sensitized aluminum litho plates, offset printing chemicals and sensitized/ lacquered films falling under Chapter 84, 37, 38 and 39 of the Central Excise Tariff Act, 1985. 2.2 One of the final products manufactured by the appellants is lacquered polyester films, for which the input is plain polyester film in jumbo rolls. In Unit 1 plain polyester film is pre-treated. Some part of pre-treat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r (Authorized Representative0 on behalf of revenue. 3.2 Arguing on behalf of appellants learned advocate submitted - i. In case of transactions between Unit 1 and Unit 2, the issue was totally revenue neutral as to what so ever was the duty paid in one unit was available as CENVAT credit to the other unit. In case of SRF Ltd [2007 (220) ELT 201 (T)], it has been held by the tribunal that when the transactions are revenue neutral, the demand of duty, interest and penalty is not maintainable. Thus no penalty should be imposed on them under Rule 25 of Central Excise Rules, 2002 read with Section 11AC of Central excise Act,1944. ii. There was no malafide intention on the their part to evade the payment of duty and the short payment occurred duty to system glitch in SAP-ERP system of the company. The short payment thus occurred due to reason beyond their control. However when they identified the short payment they came forward and made goods the duty short paid by themselves even before the issue of show cause notice. iii. The goods in respect of which duty has not been paid were duly accounted by them in their production records and were cleared from their premises only after makin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this manner Appellants were passing on the CENVAT credit to their buyers without actually depositing the duty. 4.4 The argument of the Appellants to the effect that they had paid the duty prior to issuance of Show Cause Notice do not hold goods in view of the decision of Bombay High Court in case of Shri Ram Aluminium Pvt Ltd [2009 (242) ELT 202 (BOM)], Hon'ble High Court held as follows: "3. The Respondents aggrieved preferred an Appeal before the CESTAT. The learned Tribunal [2006 (199) E.L.T. 331 (Tri. - Mum.)] was of the view that the offence is clearly established as the act of clandestine removal of goods has come to the public gaze and referred to the observations in the case of M/s. Saheli Synthetics Pvt. Ltd. v. C.C. Kandla (Appeal Nos. C/414 to 416/03), dated 19th July, 2005 [2006 (197) E.L.T. 337 (Tri. Mum.)]. The learned Tribunal, however, observed that considering the findings of the larger Bench in the case of Machino Montell (I) Ltd., 2006 (202) E.L.T. 398 (P & H) = 2006 (4) S.T.R. 177 (P & H) which had held that if the duty is payable by the assessee before issuance of show cause notice no penalty can be impugned under Section 11AC and no interest can be demanded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r different from the penalty for a crime or a fine or forfeiture provided as punishment for the violation of criminal or penal laws. 8. Having so said we may now consider the first limb of argument as raised by the learned Amicus Curiae. The relevant portion of Section 11A of Central Excise Act, 1944 reads as under :- "11A. Recovery of duties not levied or not paid or shortlevied or short-paid or erroneously refunded. - (1) When any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, a Central Excise Officer may, within six months from the relevant date, serve notice on the person chargeable with the duty which has not been levied or paid or which has been short-levied or short-paid or to whom the refund has erroneously been made, requiring him to show cause why he should not pay the amount specified in the notice : Provided that where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reason of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellants in the two appeals, it was contended, relying upon a recent decision of this Court in Union of India v. Dharamendra Textile Processors, 2008 (231) E.L.T. 3 (S.C.) that mere non payment or short payment of duty (without anything else) would inevitably lead to imposition of penalty equal to the amount by which duty was short paid. In our view the reason assigned by the Tribunal to strike down the levy of penalty against the assessees is as misconceived as the interpretation of Dharamendra Textiles is misconstrued by the Revenue. We completely fail to see how payment of the differential duty, whether before or after the show cause notice is issued, can alter the liability for penalty, the conditions for which are clearly spelled out in Section 11 AC of the Act." 11. Sub-section 2B of Section 11A provides that in case the person in default makes payment of the escaped amount of duty before the service of notice then the Revenue will not give him the notice under sub-section 1. This, perhaps, is the basis of the common though erroneous view that no penalty would be leviable if the escaped amount of duty is paid before the service of notice. It, however, overlooks the tw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... firstly, that there must be intent to evade payment of duty and secondly the duty ought to be as determined under sub-section (2) of Section 11A. It is, therefore, clear that it is only on these two requirements being followed that penalty is imposable. The determination of duty admittedly is under Section 11A. The other limb of argument is that once the duty is paid even before the show cause notice, the question of the A.O. in a case where duty demanded has been paid there will be no determination of liability. In our opinion, the argument is fallacious. Under Section 11A there must be a determination of duty irrespective of as to whether duty demanded is paid before issuance of show cause notice or before order is passed. Any amounts paid as aforesaid are to be adjusted against the final order of adjudication. In other words the monies paid will be adjusted against the duty ascertained and consequently if the full amount has been paid there will be no requirement of further deposit and/or invocation of the provisions for recovery. All that Section 11AC requires is the duty as determined. Once the A.O., passes the order under Section 11A. the duty is determined. The question, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mills and Commissioner of Customs and Central Excise v. Lanco Industries Ltd. reported in 2009 (13) SCC 448 = 2009 (238) E.L.T. 3 (S.C.). In the said judgment, scope and ambit of Section 11-AC was considered and decided by this Court. 4. The learned counsel appearing for the appellant relies on the said judgment in order of substantiate his submission that the Tribunal was not justified in reducing the quantum of penalty to only ₹ 1 lakh in view of the mandatory provisions of Section 11AC of the Central Excise Act. Learned counsel appearing for the respondent, however, submits that there was only a delay of one or two days in making payment of duty with reference to the clearance of goods and that duty was paid even prior to issuance of the show cause notice and, therefore, the Tribunal was justified in reducing the quantum of penalty to ₹ 1 lakh. We have taken notice of the aforesaid submission also. However, reference is made to the decision of Rajasthan Spinning and Weaving Mills (Supra). We find in the said case also, a similar submission was made contending, inter alia, that there was no warrant for levy of penalty since the assessee had deposited balance amount o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 twentyfive per cent of the duty so determined: Provided further that the benefit of reduced penalty under the first proviso shall be available if the amount of penalty so determined has also been paid within the period of thirty days referred to in that proviso: Provided also that where the duty determined to be payable is reduced or increased by the Commissioner (Appeals), the Appellate Tribunal or, as the case may be, the court, then, for the purposes of this section, the duty as reduced or increased, as the case may be, shall be taken into account: Provided also that in case where the duty determined to be payable is increased by the Commissioner (Appeals), the Appellate Tribunal or, as the case may be, the court, then, the benefit of reduced penalty under the first proviso shall be available, if the amount of duty so increased, the interest payable thereon and twenty-five per cent of the consequential increase of penalty have also been paid within thirty days of ..... 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