CESTAT sets aside differential Central Excise duty demand under Section 11A(4) after appellant paid all dues with interest

The CESTAT Mumbai set aside a differential Central Excise duty demand under Section 11A(4) of the Central Excise Act, 1944. The appellant had paid duty on intermediate goods based on available records at clearance, then paid differential duty with interest after obtaining CAS-4 certificates showing actual costs. The Tribunal found the demand unsustainable as the appellant had informed the department of their practice and paid all dues with interest. The extended period of limitation was held inapplicable for inter-unit clearances, citing precedent. Penalties under Section 11AC(1)(a) and Rule 25(1)(a) were also set aside. Appeal allowed.

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Issues Involved:
1. Sustainability of differential Central Excise duty demand u/s 11A(4) of the Central Excise Act, 1944.
2. Imposition of penalty on the appellant under the Central Excise Act and Rules.

Summary:

1. Sustainability of Differential Central Excise Duty Demand:
The appellant, engaged in manufacturing various products, adopted a practice of determining the assessable value of intermediate goods by adding 10% to the cost of production and paying duty on this provisional value. The Department objected to this practice and issued a show cause notice demanding differential duty of Rs. 78,67,377/- u/s 11A(4) of the Central Excise Act, 1944. The Commissioner adjudicated the demand to Rs. 19,07,181/- based on final CAS-4 certificates and appropriated the amount paid by the appellant along with interest. The Tribunal found an apparent contradiction in the Commissioner's findings, noting that the appellant had informed the Department of their duty payment practice and paid the differential duty based on verified CAS-4 certificates. The Tribunal concluded that there was no evidence of suppression or willful misdeclaration by the appellant, and thus, the demand of duty invoking the provisions of Section 11A(4) was not sustainable.

2. Imposition of Penalty:
The Commissioner imposed penalties on the appellant u/s 11AC(1a) and Rule 25(1)(a) of the Central Excise Rules, 2022. However, the Tribunal referred to various judgments, including the Hon'ble High Court of Gujarat in the case of Commissioner of Central Excise & Customs, Bhavnagar Vs. Saurashtra Cement Ltd., which emphasized that penalties under Section 11AC require proof of fraud, collusion, willful misstatement, or suppression of facts. The Tribunal found that the appellant had no intention to evade duty and had paid the differential duty along with interest upon finalization of CAS-4 certificates. The Tribunal also noted that the extended period of limitation for demanding duty was not applicable as the appellant had informed the Department of their practices. Consequently, the imposition of penalties was deemed unsustainable.

Conclusion:
The Tribunal set aside the impugned order to the extent of imposing penalties on the appellant and upheld the payment of additional duty and interest already made by the appellant, thus allowing the appeal in favor of the appellant.

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