CESTAT upholds duty demand on packing material, drops penalty under Section 11AC. Assessees' voluntary disclosure considered.

The Appellate Tribunal CESTAT, CHENNAI upheld the duty demand on packing material not included in the assessable value, amounting to Rs. 44,162. The penalty under Section 11AC was dropped as there was no wilful suppression by the assessees. The Tribunal found that the assessees had voluntarily disclosed the receipt of free packing material to the department and provided all relevant documents, making the charge of suppression unsustainable. Despite not challenging the duty demand, the penalty was not imposed as the department was already aware of the situation. The appeal for penalty retention by the Revenue was rejected.

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Issues involved: Duty demand on packing material not included in assessable value, penalty under Section 11AC of the Central Excise Act, 1944.

The Appellate Tribunal CESTAT, CHENNAI upheld the duty demand of Rs. 44,162/- on packing material supplied free by a company to the respondents without including it in the assessable value of goods. The Commissioner (Appeals) dropped the penalty under Section 11AC, citing no wilful suppression by the assessees to evade duty.

The Tribunal noted that the appellants voluntarily disclosed the receipt of free packing material to the department and provided all relevant documents to the internal audit officers. Consequently, the charge of suppression was deemed unsustainable. Despite not challenging the duty demand, the Tribunal ruled that penalty should not be imposed since the department was aware of the supply of free packing material to the assessees. The penalty on the respondents was deemed unwarranted, and the impugned order was upheld, leading to the rejection of the appeal.

In response to the Revenue's appeal for retaining the penalty, the cross-objection was allowed, resulting in the rejection of the appeal for penalty retention.

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