Commission upholds duty liability calculation at removal rate, grants penalty immunity, payment due within 30 days

The Commission held that the duty liability under Section 32E of the Central Excise Act should be calculated at the rate applicable at the time of removal, rejecting the applicant's plea for a lower rate at the time of payment. The total duty liability was settled at Rs. 1,28,21,328/-, with a balance of Rs. 82,46,989/- to be paid within 30 days. The applicant was granted immunity from penalty and prosecution, with no interest payable due to the removal predating interest liability imposition.

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Issues Involved:
1. Clandestine removal of goods.
2. Under-valuation of goods.
3. Determination of duty liability under Section 32E of the Central Excise Act.
4. Applicability of Rule 9A of the Central Excise Rules, 1944.

Detailed Analysis:

1. Clandestine Removal of Goods:
The applicant, engaged in the manufacture of refrigeration machinery, was found to have removed goods without payment of duty. The Central Excise authorities issued a Show Cause Notice (SCN) on 5-10-81, demanding duty amounting to Rs. 1,28,21,328/- for clandestine removal of goods. The applicant accepted the allegation but contended that the duty should be calculated at the rate of 16% ad val. applicable at the time of payment, not the 40% ad val. rate at the time of removal. The Commission held that the duty liability under Section 32E is the one that should have been paid at the time of removal, thus rejecting the applicant's plea. The correct duty liability was settled at Rs. 1,28,21,328/-, with Rs. 45,74,339/- already paid and the balance of Rs. 82,46,989/- to be paid within 30 days.

2. Under-Valuation of Goods:
The second part of the SCN demanded Rs. 44,58,176/- for under-valuation of goods. This charge was dropped by the adjudicating authority, and the Department did not appeal against this portion of the order. The applicant argued that the issue of undervaluation does not survive due to the doctrine of res judicata and the doctrine of merger. The Commission agreed, noting that the order of remand by CEGAT pertained only to the clandestine removal of goods, and the undervaluation issue was no longer pending.

3. Determination of Duty Liability under Section 32E:
The applicant argued that the duty liability disclosed under Section 32E should be calculated at the rate prevailing at the time of payment, not at the time of removal. The Commission clarified that Section 32E requires a full and true disclosure of duty liability, which refers to the duty that should have been paid at the time of removal. The Commission compared this with Section 245C of the Income-tax Act, which requires disclosure of income, not income-tax. Hence, the duty liability under Section 32E must be calculated at the rate applicable at the time of removal.

4. Applicability of Rule 9A of the Central Excise Rules, 1944:
The applicant contended that Rule 9A(5) of the Central Excise Rules, 1944, which was amended to apply the rate of duty prevailing at the time of removal, should not affect the duty liability disclosed under Section 32E. The Commission rejected this argument, stating that Section 32E's requirement for full and true disclosure includes the duty rate applicable at the time of removal. The duty liability must be calculated as per the rate at the time of removal, not at a later date.

Conclusion:
The Commission settled the case with the following terms:
1. The total duty liability is Rs. 1,28,21,328/-, with Rs. 45,74,339/- already paid. The balance of Rs. 82,46,989/- is to be paid within 30 days.
2. The applicant is granted immunity from penalty and prosecution under the Central Excise Act, 1944.
3. No interest is payable as the period of removal predates the imposition of interest liability in the Act.

The settlement will become void if obtained by fraud or misrepresentation of facts, and the immunity granted is subject to the provisions of Section 32K of the Act.

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