2008 (7) TMI 360 - HC - Central Excise

Appeal challenging tax penalties dismissed, no evidence of intentional evasion.

The High Court dismissed the appeal challenging the Tribunal's decision to set aside penalties under Section 11AC of the Central Excise Act. The Court ... Clandestine removal of goods – wrong availment of benefit of notification - had paid only the Basic Excise Duty on Window/Room Air-conditioners Kits, Cooling Units of Split Air-conditioners by declaring them as “Parts” of Air-conditioners under Chapter heading No. 8415 of the Central Excise Tariff Act, 1985 and by availing the benefit of Notification No. 22/2000-CE, dated 6-3-2000 vide which the parts of Air-conditioners were exempted from payment of Special Excise Duty - The goods, which were removed under invoices by describing the same as parts of air conditioners and exemption, meant for parts of air conditioners, was claimed and availed of. It is not a case where any facts were suppressed. Demand is not maintainable. Issues:1. Justification of extending the benefit of doubt and setting aside penalty under Section 11AC of the Central Excise Act, 1944.2. Validity of Tribunal's decision on clandestine removal of excisable goods without challenge in the appeal.3. Validity of setting aside penalty on the partner under Section 11AC due to prior deposit of Central Excise duty.Analysis:1. The appellant revenue questioned the Tribunal's decision to extend the benefit of doubt to the respondents regarding the equating of the case with clandestine removal and upholding the setting aside of the penalty under Section 11AC. The Tribunal held that the assembly of split air conditioners into full units did not constitute deliberate tax evasion, as the parts were declared as such in accordance with a beneficial interpretation of a notification. The Tribunal's view was that there was no deliberate attempt to evade tax, leading to the penalty being deleted.2. The Tribunal's decision to overturn findings on the clandestine removal of excisable goods without challenge in the appeal was based on the interpretation that the respondents' actions did not amount to evasion. The Tribunal noted that the respondents' interpretation of the notification was beneficial and not indicative of clandestine activities. Therefore, the Tribunal did not find it necessary to uphold the penalty under Section 11AC in this context.3. The issue of setting aside the penalty on the partner under Section 11AC due to the prior deposit of Central Excise duty was also raised. The appellant argued that the penalty should not have been deleted, emphasizing that the duty was levied alongside the penalty under Section 11AC. However, the Tribunal found that the respondents had not suppressed any facts and had availed themselves of the exemption meant for parts of air conditioners in good faith. Consequently, the Tribunal upheld the decision to set aside the penalty.In conclusion, the High Court dismissed the appeal, stating that there was no substantial question of law warranting interference. The Court found no infirmity in the Tribunal's decision, as the facts were not in dispute, and there was no evidence of deliberate tax evasion or suppression of facts by the respondents.