Tribunal decision: Penalties overturned for non-payment of Central Excise duty on unbranded chewing tobacco

The Tribunal partly allowed the appeals, setting aside the demand for the extended period and imposed penalties related to non-payment of Central Excise duty on unbranded chewing tobacco. The duty for the normal period remained payable, and penalties under Section 11AC were deemed unjustified. The Tribunal emphasized that the burden of proving malafide lies with the department, not the assessee, and found insufficient grounds to sustain allegations of willful mis-statement or suppression of facts.

---

---

Issues:
- Allegation of non-payment of Central Excise duty on unbranded chewing tobacco
- Contesting fraud, collusion, willful mis-statement for extended period and penalty imposition

Analysis:
1. The appeals were against orders of Commissioner (Appeals) Delhi-II regarding the levy of additional duty of excise on unbranded chewing tobacco as per Section 85 of the Finance Act, 2005. The appellant contested the allegation of non-payment of duty and fraud, collusion, willful mis-statement for an extended period and imposition of penalty.

2. The appellants did not dispute the duty liability on unbranded chewing tobacco but contested the allegations of fraud, collusion, and willful mis-statement for the extended period and penalty imposition. They argued that they had been regularly filing ER-I returns indicating the manufacture and clearance of unbranded tobacco, even mentioning these facts in forwarding letters and declarations for SSI exemption.

3. Upon examination, the Tribunal found that the first appellate authority did not provide a legal basis for upholding the demand for an extended period and imposing penalties. The Tribunal noted that the mere non-payment of duty does not necessarily imply collusion or willful mis-statement, citing a Supreme Court judgment. The burden of proving malafide is on the department, not the assessee. The show cause notice lacked specific grounds for supporting the demand for an extended period.

4. Referring to a similar case, the Tribunal held that there were insufficient grounds to sustain the allegations of willful mis-statement or suppression of facts. Consequently, the demand for the extended period was deemed unsustainable, and the duty for the normal period was to be paid. The imposition of penalties under Section 11AC was also set aside based on the factual and legal position of the case.

5. Ultimately, the appeals were partly allowed, setting aside the demand for the extended period and the imposed penalties. The duty for the normal period remained payable, and the penalties under Section 11AC were not justified. The decision was pronounced on 18.10.2016 by the Tribunal.

---