2015 (8) TMI 23 - AT - Central Excise

Tribunal Upholds Penalties for Misstatement, Allows Appeal on CENVAT Credit

Johnson & Johnson Ltd. Versus Commissioner of Central Excise & ST (LTU), Mumbai

The Tribunal upheld the penalties imposed under Section 11AC and Rule 25 of the Central Excise Act due to the appellant's wilful misstatement and ... Penalty u/s 11AC - Valuation of goods - Rule 8 - appellant, at the outset, submitted that they are not disputing the duty demanded by the Revenue as the same was paid by the appellant even before issue of show cause notice, they are only disputing the penalty imposed under Section 11AC and Rule 25 of the Central Excise Rules, 2002. - Held that:- With the new cost of production it was found that there has been a short levy of ₹ 54,97,281/-. The said amount along with interest was thereafter paid by the appellant. If we see the conduct of the appellant, in our view, the ingredients of Section 11AC, i.e. wilful misstatement and suppression of facts are evident inasmuch as if the assessable value of certain goods are getting reduced w.e.f. January 2004 from the earlier assessable values, the appellant should have checked thoroughly the data. Further, when the Revenue raised the doubt about the value in August 2004, it was the duty of the appellant to recheck whether there has been any mistake on their part. Even this was not done. This only points to wilful misstatement and suppression of facts on the part of the appellant. The fact that they paid the duty in the month of February, to our mind, is of no consequence as once the Assistant Director (Costs) came into the picture and went into the various costing details, the appellant was left with no option. Under the circumstances, we are of the considered view that the ingredients of Section 11AC are satisfied and, therefore, the penalty under Section 11AC is leviable. - Decided against the assessee. Issues Involved:1. Imposition of penalty under Section 11AC of the Central Excise Act and Rule 25 of the Central Excise Rules.2. Denial of CENVAT credit under Rule 9(1)(b) of the CENVAT Credit Rules.Issue-wise Detailed Analysis:1. Imposition of Penalty under Section 11AC and Rule 25:The appellant was manufacturing unsterilised absorbable sutures at their Dharavi unit and transferring them to their Aurangabad unit for further processing. The valuation of these goods was done under Rule 8 of the Central Excise Valuation Rules. The appellant did not dispute the duty demanded by the Revenue, which they had paid before the issuance of the show cause notice. However, they contested the penalty imposed under Section 11AC and Rule 25.The appellant argued that there was no suppression with intent to evade duty, as they had provided the standard cost of production to the excise authorities at the beginning of each year, certified by a Cost Accountant. They claimed the reduction in assessable value was due to a decrease in costs and justified by cost data. However, the Revenue found discrepancies and initiated an investigation by the Assistant Director (Costs), leading to the discovery of a substantial short levy of duty.The Tribunal found that the appellant's conduct indicated wilful misstatement and suppression of facts. The drastic reduction in declared values without thorough checking and the vague responses to the Revenue's queries demonstrated intent to evade duty. The Tribunal upheld the penalty under Section 11AC, stating that the appellant should have opted for provisional assessment if the figures were tentative. The Tribunal also imposed a penalty under Rule 25, as the appellant had removed goods without correct value determination, making them liable for penalty.2. Denial of CENVAT Credit under Rule 9(1)(b):The second issue pertained to the denial of CENVAT credit for the Aurangabad unit based on Rule 9(1)(b) of the CENVAT Credit Rules. The appellant argued that this denial was contrary to the decision of the Karnataka High Court in the case of Karnataka Soaps & Detergents Ltd. The Tribunal agreed with the appellant, noting that the Karnataka High Court had held that additional duty paid under reassessment or detection by the department is available as credit under Rule 3 of the CENVAT Credit Rules. The Tribunal found that the denial of credit was not justified and allowed the appellant's appeal on this issue.Conclusion:The Tribunal dismissed the appeal regarding the imposition of penalties under Section 11AC and Rule 25, affirming the penalties due to wilful misstatement and suppression of facts by the appellant. However, the Tribunal allowed the appeal concerning the denial of CENVAT credit, aligning with the Karnataka High Court's decision that additional duty paid is eligible for credit under Rule 3 of the CENVAT Credit Rules. The cross objections filed by the Revenue were also dismissed.