2018 (1) TMI 468 - AT - Central Excise

Tribunal rules in favor of appellant, absolving duty payment lapse as revenue-neutral shift; penalties set aside.

The Tribunal found in favor of the appellant, absolving them of malafide intent in not paying duty on certain capital goods during the factory shift. The ... Imposition of penalty - revenue-neutrality - mala fide intention to evade duty - reversal of CENVAT credit on removal of capital goods - payment of duty with interest and finalisation of proceedings under Section 11A(2B) of the Central Excise Act, 1944Imposition of penalty - revenue-neutrality - mala fide intention to evade duty - payment of duty with interest and finalisation of proceedings under Section 11A(2B) of the Central Excise Act, 1944 - Validity of penalties imposed for non-payment of duty on certain capital goods and alleged wrongful availment of CENVAT credit when the factory was shifted - HELD THAT: - The Tribunal found that the capital goods cleared from the Thane unit became available as CENVAT credit at the Ambernath unit, producing a revenue-neutral outcome. The appellant paid the differential duty and interest after audit objections; in respect of the D.G. set, the appellant entertained a bona fide belief that reversal or duty was not required but in any event paid duty with interest to avoid litigation. The Tribunal held that these facts negatived any mala fide intention to evade duty, and that initiation of penal proceedings was not warranted. Further, the show-cause notice was issued after a substantial gap, and the circumstances fell within the purport of Section 11A(2B) of the Central Excise Act, 1944, which contemplates that payment of duty with interest must lead to finalisation of proceedings; accordingly, continuing to pursue penalty was improper. For these reasons the penalties were set aside.Penalties imposed for non-payment of duty and alleged wrongful availment of CENVAT credit set aside; appeals allowed to that extent.Final Conclusion: The Tribunal allowed the appeals in part by setting aside the penalty orders: having regard to the revenue-neutral position, payment of differential duty with interest, absence of mala fide intention, and the effect of Section 11A(2B), imposition of penalty was held unjustified. Issues:1. Imposition of penalties on the appellant for not paying duty on certain capital goods during the shifting of their factory.2. Whether the appellant acted with malafide intention to evade payment of duty.3. Application of penal provisions under Section 11A (2B) of the Central Excise Act, 1944.Analysis:1. The appellant, engaged in medicine manufacturing, shifted their factory from Thane to Ambernath. While most capital goods were cleared with duty payment, a D.G. set not shifted attracted audit objection. The appellant paid duty with interest post-audit. The challenge was against the penalties imposed for non-payment of duty.2. The appellant contended that the shift was revenue-neutral as Thane Unit's payments were credited to Ambernath Unit. Regarding the D.G. set, they believed no duty was due but paid to avoid disputes. The appellant argued against malafide intent for penalty imposition.3. The Revenue argued malafide intent due to selective duty payment on capital goods. The Tribunal found the shift was revenue-neutral, absolving the appellant of malafide intent. The delayed penalty notice post-duty payment violated Section 11A (2B), indicating Revenue uncertainty. Consequently, the penalties were set aside, allowing all three appeals.