2019 (9) TMI 1528 - AT - Central Excise

Appellate Tribunal Overturns Penalty Under Central Excise Act

The Appellate Tribunal set aside the penalty imposed on the appellant under Section 11AC of the Central Excise Act, 1944. The Tribunal emphasized that the ... Demand of penalty - suppression of facts or not - tax and interest is not in dispute and was already paid by the appellants before the issuance of the show cause notice and have been appropriated by the Adjudicating Authority in the adjudication order - HELD THAT:- It is found from the records that the appellants have erred in applying the price applicable to the SAIL to the unrelated buyers at the factory gate in respect of stock transfers. The transactions were duly recorded in their books of account. On being pointed out, they immediately deposited the Central Excise duty along with appropriate interest. On perusal of records, it is observed that the learned Commissioner(Appeals) has failed to bring on record any ingredient of suppression of facts with an intent to evade payment of duty. There is nothing found regarding the ingredient of suppression of facts, fraud, collusion or any willful misstatement etc. Penalty set aside - appeal allowed - decided in favor of appellant. Issues:1. Imposition of penalty under Section 11AC of the Central Excise Act, 1944 when duty and interest are paid before the issue of Show Cause Notice.Comprehensive Analysis:The appellants appealed against the Order passed by the Commissioner(Appeals), challenging the penalty imposed under Section 11AC of the Central Excise Act, 1944. The demand and interest were not in dispute and had been paid by the appellants before the issuance of the show cause notice. The Commissioner(Appeals) imposed a penalty despite the payment. The issue raised in all the appeals was whether a penalty could be imposed if duty and interest were paid before the issue of the Show Cause Notice. The Hon’ble Apex Court in Dharmendra Textiles Processors Vs. Union of India clarified that penalty under Section 11AC is mandatory, and there is no discretion available on the quantum of penalty. The Court emphasized that mens rea is not an essential ingredient for imposing the penalty under Section 11AC. The judgment highlighted that the penalty under Section 11AC is a punishment for deliberate deception by the assessee with the intent to evade duty. The decision of the Hon’ble Apex Court settled the substantial question of law, making it clear that penalty under Section 11AC is mandatory, and no discretion is available in its imposition.The Appellate Tribunal, after hearing both sides and examining the appeal records, found that the Commissioner(Appeals) failed to establish any suppression of facts with intent to evade duty. The Tribunal observed that the appellants had erred in applying a price applicable to SAIL to unrelated buyers at the factory gate for stock transfers but had duly recorded the transactions in their books of account. Upon being informed of the error, the appellants immediately paid the Central Excise duty along with interest. The Tribunal noted that there was no finding regarding suppression of facts, fraud, collusion, or any willful misstatement by the appellants. Citing the judgment of the Hon’ble Supreme Court in Union of India vs. Rajasthan Spinning & Weaving Mills, the Tribunal emphasized the conditions that would attract penalty under Section 11AC, including fraud, collusion, willful misstatement, or suppression of facts with intent to evade payment of duty. The Tribunal set aside the penalty imposed on the appellant by following the legal principles established by the Hon’ble Supreme Court.In conclusion, the Appellate Tribunal, by following the judgments of the Hon’ble Supreme Court, set aside the penalty imposed on the appellant under Section 11AC of the Central Excise Act, 1944. The Tribunal emphasized that the penalty under Section 11AC is mandatory and must be imposed in cases of deliberate deception by the assessee to evade duty. The decision clarified that once the conditions for the application of Section 11AC are met, the authority has no discretion in quantifying the penalty, which must be equal to the duty determined. The appeal was allowed by the Tribunal, and the penalty was set aside in line with the legal precedents established by the Hon’ble Supreme Court.