2010 (4) TMI 521 - AT - Central Excise

Appellants win appeal on Excise Duty mistake, no penalty imposed.

The Tribunal ruled in favor of the appellants, setting aside the order for payment of Special Excise Duty, interest, and penalties. It was determined that ... Bonafide mistake in payment code - absence of mala fide intention to evade duty - transfer between minor heads in Personal Ledger Account - penalty not warranted where duty duly paid - rectification by inter-head transfer instead of fresh paymentBonafide mistake in payment code - absence of mala fide intention to evade duty - penalty not warranted where duty duly paid - transfer between minor heads in Personal Ledger Account - rectification by inter-head transfer instead of fresh payment - Whether demand and equal penalty for alleged short payment of Special Excise Duty could be sustained where the total duty was deposited with the Government but partly credited under an incorrect accounting code - HELD THAT: - The Tribunal found as an undisputed fact that the total quantum of duty payable for the relevant period had been transferred to Government accounts and that the shortfall alleged arose solely from credits being recorded under an incorrect accounting code. The error was held to be a bona fide mistake by the assessee's employees and not a deliberate attempt to evade duty; there was no withholding of duty from the Revenue. The Board's circular permitting transfer of credit balances between minor heads of the Personal Ledger Account was noted as authorising inter-head corrections. In these circumstances, imposition of a demand for re-payment and equal penalty was unwarranted: the correct remedy is administrative rectification by effecting the required transfer between accounting codes and civilising the records, not recovery of amounts already deposited. Consequently, penalty could not be imposed in the absence of mala fide intention to evade duty.Impugned demand and penalty set aside; assessee directed to execute documents necessary to effect transfer between accounting codes so records correctly reflect Special Excise Duty paid.Final Conclusion: The appeal is allowed: where duty was deposited with the Government but credited under an incorrect code through a bona fide mistake, the Department cannot sustain a demand and penalty; the correct course is rectification by transfer between accounting heads rather than requiring fresh payment. Issues:Challenge to order for payment of Special Excise Duty, Penalty imposition, Compliance with payment procedures, Invocation of extended period of limitation, Bona fide mistake in payment code.Analysis:The appellants contested an order requiring them to pay Special Excise Duty, interest, and penalties. The audit revealed discrepancies in the payment of duties, specifically the utilization of credit for Special Excise Duty without proper balance. The show cause notice alleged short payment of Special Excise Duty, leading to the demand confirmation in the impugned order.The appellants argued against the order on two main grounds. Firstly, they questioned the justification for invoking the extended period of limitation. Secondly, they claimed that the duty amount was already deposited, albeit partially under the wrong code, due to a bona fide mistake by an employee. The department, however, defended the order, citing non-compliance with duty payment procedures.The Tribunal noted that while there were procedural lapses in specifying the correct code for duty payment, the total duty amount was transferred to the government account. The mistake did not indicate an intention to evade payment. The circular from the Board allowed the transfer of credit balances between minor heads, indicating no default in duty payment. The Tribunal concluded that the mistake was not deliberate evasion, and there was no basis for penalty imposition.Upon review, the Tribunal deemed the mistake in depositing under the wrong code as a bona fide error. They ruled that the appellants should not be required to repay the amount to the government but should rectify the accounting code for proper record-keeping. Consequently, the impugned order was set aside, and the appeal was allowed.