2016 (7) TMI 1071 - AT - Central Excise

Tribunal rules no penalty under Central Excise Act for appellant's compliance with procedures

Visteon Automotive Systems India (P) Ltd. Versus Commissioner of Central Excise, Chennai

The Tribunal held that the penalty under Section 11AC and interest under Section 11AB of the Central Excise Act were not applicable in the case. The ... Levy of penalty u/s 11AC - malafide intention or not - dispute were related to Classification - manufacture of car Air-conditioning machine and their parts - manufactured products are cleared along with the bought out items in a kit packing. The bought out items are sold as such without any value addition. - Held that:- the appellants have made suitable declarations at the time of changes made during Budget 2000 and that the change in declaration was also made on 01.07.2000 to the effect that the duty would be deposited by them @ 32% for the clearances made by them. In the present case since the Appellant on their own has filed the declaration and had communications with the department. In these circumstances, the question of suppression of facts coupled with intention to evade payment of duty does not arise and accordingly the imposition of penalty u/s.11AC is unsustainable. - No penalty - Decided in favor of assessee. Issues Involved:1. Imposition of Penalty under Section 11AC of the Central Excise Act.2. Levy of Interest under Section 11AB of the Central Excise Act.3. Classification of products as parts of air-conditioning machines.4. Alleged willful misstatement and suppression of facts by the appellant.5. Applicability of extended period of limitation.Detailed Analysis:1. Imposition of Penalty under Section 11AC of the Central Excise Act:The core issue is whether the penalty under Section 11AC is applicable. The Tribunal found that the appellant had made suitable declarations at the time of changes during Budget 2000 and had voluntarily filed a revised declaration on 01.07.2000, indicating their intention to pay the differential duty. The Tribunal noted that the appellant had sought guidance from the department on paying the differential duty, which contradicts the claim of suppression or willful misstatement. The Tribunal referred to previous cases, including Subros Ltd. v. CCE and Union of India v. Dharmendra Textile Processors, to conclude that penalty under Section 11AC is not applicable in the absence of fraud, suppression, or willful misstatement.2. Levy of Interest under Section 11AB of the Central Excise Act:The appellant argued that interest under Section 11AB is not imposable as there was no determination by the Central Excise officer per Section 11A(2). The Tribunal agreed, noting that the duty was paid voluntarily by the appellant before any determination by the officers, thus negating the grounds for imposing interest.3. Classification of Products as Parts of Air-Conditioning Machines:The appellant consistently classified their products as parts of car air-conditioning machines, supported by declarations filed under Rule 173B. The Tribunal noted that the appellant's classification was in line with the Finance Minister's budget speech and subsequent departmental notifications. The Tribunal also referred to Circular No. 666/57/2002-CX, which clarified the classification of such products.4. Alleged Willful Misstatement and Suppression of Facts by the Appellant:The department alleged that the appellant willfully misstated the product description to avail exemption from SED. However, the Tribunal found that the appellant had made all necessary declarations and had voluntarily disclosed their intention to pay the differential duty. The Tribunal emphasized that the appellant's actions did not constitute suppression or willful misstatement.5. Applicability of Extended Period of Limitation:The Tribunal referred to the case of Subros Ltd. v. CCE, where it was held that when changes in declarations are brought to the department's notice, the extended period of limitation cannot be invoked. The Tribunal concluded that the appellant's voluntary disclosures and timely declarations negated the grounds for invoking the extended period of limitation.Conclusion:The Tribunal concluded that the penalty under Section 11AC and interest under Section 11AB are not imposable. The appellant's appeal was allowed, and the penalty imposed by the Commissioner was set aside. The Tribunal emphasized that the appellant's voluntary disclosures and compliance with departmental procedures demonstrated a lack of intent to evade duty, thus invalidating the grounds for penalty and interest.