2007 (12) TMI 122 - AT - Central Excise

Tribunal overturns penalty for duty short payment, emphasizes intent to evade proof

The Tribunal set aside the penalty imposed under Section 11AC for short payment of duty on machines received back after exhibition or repair by M/s. ... Received back 21 machines for repair and cleared the machines on payment of duty on the transaction value – in case of 3 machines duty was short paid - On the short payment being pointed out, assessee made short payment and also paid interest till the date of payment of before issue of SCN - clerical error and not deliberately - intent to evade duty is not established - duty due and interest thereon was paid before issue of SCN, penalty under Section 11AC is not warranted Issues:1. Imposition of penalty under Section 11AC for short payment of duty on clearance of machines received back after exhibition or repair.Analysis:The case involved M/s. Proteck Circuits & Systems (P) Ltd., which received back machines after exhibition or repair and cleared them on payment of duty based on transaction value. The company had received back 21 machines during March 2001 to April 2003, and in 18 cases, they paid a higher amount of duty than initially paid. The total duty paid on clearance of these machines amounted to over Rs. 23.00 lakhs. The original authority refrained from imposing any penalty as the short payment was rectified before the issuance of the show-cause notice (SCN).In the impugned order, the Commissioner (A) imposed a penalty equal to 25% of the duty amount under Section 11AC. The appellant contended that the short payment in 3 cases was due to clerical error and not deliberate evasion, as evidenced by the fact that they had paid excess duty in 18 cases. The appellant argued that there was no intention to evade duty and that the penalty was unwarranted.The Tribunal considered the submissions of both parties and noted that the lower appellate authority imposed the penalty under Section 11AC based on a Supreme Court judgment in the case of Sony India Ltd. v. CCE, Delhi. However, the Tribunal found that in cases where the intent to evade duty is not established, penalty under Section 11AC is not warranted. The Tribunal observed that the appellant's conduct, paying excess duty in most cases, indicated a clerical error rather than deliberate evasion. Additionally, the duty due and interest were paid before the issuance of the SCN, further supporting the lack of intent to evade duty. Consequently, the penalty imposed under Section 11AC was set aside, and the appeal was allowed.This judgment highlights the importance of establishing intent to evade duty for the imposition of penalties under Section 11AC in cases of short payment of duty. It also underscores the significance of rectifying errors promptly and paying the dues before the issuance of show-cause notices to avoid penalties.