2017 (6) TMI 576 - AT - Central Excise

Tribunal upholds penalty for undervaluing goods, despite post-payment, under Central Excise Act

M/s. Pricol Ltd. Versus Commissioner of Central Excise, Coimbatore

The Tribunal upheld a penalty of Rs. 60,18,344/- under Section 11AC of the Central Excise Act against the appellants for deliberately undervaluing goods ... Valuation - components of speedometer manufactured through job work - moulds and dyes were cleared on payment of duty based on assessable value as determined by the appellants - department issued a SCN for demanding differential duty on the goods based on CAS-4 value, with interest thereon, and for imposing penalty - whether the duty liability was short paid before issue of the show cause notice on 05.01.2006, whether penalty is imposable on the appellants under Section 11AC of the Central Excise Act and whether there was deliberate undervaluation of goods for the material period, without following CAS-4? Held that: - The Jurisdictional High Court of Madras in the case of Arun Vyapar Udyog Pvt. Ltd. Vs CESTAT Chennai [2013 (12) TMI 817 - MADRAS HIGH COURT] has held that discharge of duty liability before issuance of SCN is immaterial for application of Section 11AC. Undervaluation of assessable value by the appellant by not adopting CAS-4 valuation for as many as 22 months is nothing but a deliberate undervaluation with the intention of evading full duty liability required to be discharged under law. The acts and omissions of the appellant in this case are very much acts of fraud with intent to evade payment of duty. A continued hiatus of 'twenty two' months can in no way explain the conduct of the appellant. Discernably therefore, the appellants knowingly and willfully adopted lesser assessable/transaction value in contravention of Rules 4 & 8 of Central Excise (Valuation) Rules, 2000 read with Rule 8 of Central Excise (Valuation)Rules, 2000. Such undervaluation over a period of one and half years resulting in evasion of duty of ₹ 60,18,344/- calls for levy of penalty. All the provisions of Section 11AC ibid will apply to this case, hence there cannot be any discretion in the imposition of penalty equal to the differential duty determined. Appeal dismissed - decided against appellant. Issues Involved:1. Whether the duty liability was short paid before the issue of the show cause notice.2. Whether penalty is imposable on the appellants under Section 11AC of the Central Excise Act.3. Whether there was deliberate undervaluation of goods for the material period without following CAS-4 guidelines.Detailed Analysis:1. Duty Liability Short Paid:The appellants, engaged in manufacturing speedometers and parts, supplied moulds and dies to job workers during Feb'03 to Nov'04. These were cleared on payment of duty based on their own valuation, not following CAS-4 guidelines. The department issued a show cause notice demanding differential duty based on CAS-4 value. The appellants accepted the duty liability but contested the interest and penalty.2. Imposition of Penalty Under Section 11AC:Section 11AC mandates a penalty equal to the duty evaded if the short payment is due to fraud, collusion, wilful misstatement, suppression of facts, or contravention of the Act with intent to evade duty. The appellants argued that since CAS-4 was introduced later, they should not be penalized. However, the department contended that the appellants were aware of the CAS-4 guidelines and deliberately undervalued the goods, thus evading duty.3. Deliberate Undervaluation:The appellants did not adopt CAS-4 valuation for 22 months, resulting in a differential duty of Rs. 60,18,344/-. The delay in adopting CAS-4 was considered deliberate, as the appellants continued undervaluing the assessable value despite knowing the new guidelines. This conduct was deemed fraudulent, intending to evade duty.Legal Provisions and Interpretation:- Section 11AC: Provides for a mandatory penalty equal to the duty evaded if the short payment is due to fraud, collusion, wilful misstatement, suppression of facts, or contravention of the Act with intent to evade duty.- Judicial Precedents: The Supreme Court in Union of India v. Rajasthan Spinning & Weaving Mills clarified that once Section 11AC is applicable, there is no discretion in the quantum of penalty. Payment of duty before or after the show cause notice does not alter the liability for penalty.Conclusion:The Tribunal concluded that the appellants deliberately undervalued the assessable value by not adopting CAS-4, resulting in evasion of duty. The conduct amounted to fraud with intent to evade payment of duty. Therefore, the penalty equal to the differential duty of Rs. 60,18,344/- was upheld under Section 11AC of the Central Excise Act. The appeal filed by the appellants was dismissed.Final Order:The appeal was dismissed, and the penalty of Rs. 60,18,344/- was upheld. (Pronounced in open court on 12.06.2017)