2026 (3) TMI 588 - AT - Central Excise

No finding of suppression means excise penalties cannot be imposed; clubbing issue remanded pending apex decision.

The note addresses two issues: (1) whether clearances of two units must be clubbed for SSI exemption entitlement - the Tribunal remitted the assessee ... Clubbing of turnovers - Entitlement to SSI exemption Notification No.7/1997-C.E. and No.8/2003-C.E. for the relevant period - exceeding the turnover limit as prescribed under the said Notification - suppression of facts - Remand pending determination by a higher forum - penalty imposable for absence of suppression and s.11AC finding - manufacture of pesticides viz., water soluble Neem Extracts, Neem Oil, Neem Husk, Neem De-oiled cake and Econeem falling under Chapter subheading 3808 of Central Excise Tariff Act. Remand pending determination by a higher forum - HELD THAT:- The Tribunal noted that its prior final order dated 17.11.2016 (which held that clearances of both units are to be clubbed for applying the SSI exemption for the relevant period) is under challenge before the Supreme Court. Given the admitted Civil Appeal before the Supreme Court arising from that order and the likelihood that the outcome will determine the core controversy, the Tribunal exercised its discretion to remit the matters to the adjudicating authority to await the Supreme Court's decision rather than decide afresh. The remand was ordered so that further adjudication proceeds subject to the Supreme Court's determination of the admitted appeal. [Paras 7] Appeals filed by the assessee are allowed by remanding the matters to the adjudicating authority to await the Supreme Court's decision. Penalties under Rule 173Q and Rule 25 of the Central Excise Rules - absence of a finding of suppression as contemplated by Section 11AC - HELD THAT:- The Tribunal upheld the Commissioner's conclusion that there was no finding of suppression and that the demand was confined to the normal period. Because the statutory precondition for invoking Section 11AC was not satisfied, the requirements for imposing penalties under Rule 173Q and Rule 25 were not fulfilled. On that basis the Tribunal found that the imposition of penalty could not be sustained and the penalties were properly dropped. [Paras 8] Impugned order upholding the dropping of penalties under Rule 173Q and Rule 25 is affirmed and the Revenue's appeals on penalty are dismissed. Final Conclusion: The appeals by the assessee are remitted to the adjudicating authority to await the Supreme Court's decision on the admitted appeal arising from the Tribunal's earlier order; the Revenue's appeals against the dropping of penalties are dismissed because there was no finding of suppression and the statutory condition for invoking penalties under Section 11AC was not met. Issues: (i) Whether the clearances of two units should be clubbed for determining entitlement to SSI exemption Notification No.7/1997-C.E. and No.8/2003-C.E. for the relevant period; (ii) Whether penalties under Rule 173Q and Rule 25 of the Central Excise Rules are imposable in absence of a finding of suppression as contemplated under Section 11AC of the Act.Issue (i): Whether the clearances of the two units are required to be clubbed for determining admissibility of the SSI exemption notifications for the relevant period.Analysis: The Tribunal reviewed the procedural and substantive history including prior remands and appellate proceedings, and noted that the question of clubbing had been considered by this Tribunal previously. Given that the appeal arising from the Tribunal's prior order dated 17.11.2016 is pending before the Hon'ble Supreme Court, the Tribunal considered it prudent to remit the matter to the adjudicating authority to await the Supreme Court's decision and for fresh consideration in that light.Conclusion: The appeals filed by the assessee are allowed by remanding the matter to the adjudicating authority to await and take into account the decision of the Hon'ble Supreme Court on the appeal against the Tribunal's order dated 17.11.2016.Issue (ii): Whether penalties under Rule 173Q and Rule 25 of the Central Excise Rules can be imposed where there is no finding of suppression under Section 11AC of the Act and the demand is confined to the normal period.Analysis: The Commissioner found no suppression of facts and limited the demand to the normal period; consequently the prerequisite conditions for invoking Rule 173Q and Rule 25 were not satisfied because there was no finding as required by Section 11AC. On this basis the Commissioner dropped penalties, and the Tribunal examined and upheld that conclusion.Conclusion: The appeals filed by the Revenue are dismissed; the impugned order upholding the dropping of penalties under Rule 173Q and Rule 25 is affirmed (penalties not imposable in absence of suppression finding under Section 11AC and where demand is for the normal period).Final Conclusion: The Tribunal remanded the assessee appeals to the adjudicating authority for reconsideration in view of the pending Supreme Court appeal on the clubbing issue, and affirmed the dropping of penalties by the Commissioner; proceedings are finally disposed of by remand and dismissal of the Revenue appeals.Ratio Decidendi: Where there is no finding of suppression as required by Section 11AC of the Central Excise Act and the demand is confined to the normal period of limitation, the conditions for imposing penalties under Rule 173Q and Rule 25 of the Central Excise Rules are not satisfied and penalties are not imposable.