2013 (10) TMI 1351 - HC - Central Excise

Customs Tribunal Upheld; Penalty Dismissed Under Section 11AC. Genuine Belief in Exemption.

The High Court upheld the decision of the Customs, Excise and Service Tax Appellate Tribunal, dismissing the Revenue's appeal. The Court disagreed with ... - Issues involved: The issue involved in this case is whether the imposition of penalty under Section 11AC of the Central Excise Act is justified for the contravention of statutory provisions related to clearance of goods without payment of duty.Summary:1. The assessee, a Small Scale Industry (SSI) unit engaged in making readymade garments, was alleged to have cleared goods without paying duty and not registering with the Department. A show cause notice was issued demanding duty for the period from April 2001 to August 2001, along with a proposal to levy penalty under Section 11AC of the Central Excise Act. 2. The assessee contended that they believed they were eligible for exemption as an SSI unit for local clearances up to a certain amount, but later realized they were not exempt if they used another brand name. Despite their belief in eligibility for exemption, the adjudicating authority demanded payment of duty under Section 11A of the Act.3. The assessee appealed to the First Appellate Authority, which noted that the duty had been paid on various occasions before the show cause notice was issued. The authority acknowledged the lack of awareness of the frequent changes in notifications and reduced the penalty amount, partially allowing the appeal.4. The Revenue appealed to the Customs, Excise and Service Tax Appellate Tribunal, arguing that the relief granted to the assessee was not justified since duty was paid only upon detection by the Revenue. The Tribunal, however, observed that the assessee had paid the excess duty liability before the show cause notice was issued, based on a genuine belief in exemption. The Tribunal dismissed the Revenue's appeal.5. The High Court, after hearing the Revenue's counsel and noting the absence of representation from the respondent/assessee, disagreed with the Revenue's argument that penalty was warranted due to non-payment of duty on goods clearance. It highlighted the lack of reference to statutory contraventions in the show cause notice and upheld the Tribunal's decision, concluding that the appeal failed and was dismissed without costs.