https://www.taxtmi.com/css/info/rss_sitemap/rss_feed.css?v=1746094055 https://www.taxtmi.com Business/Tax/Law/GST/India/Taxation/Policies/Legal/Corporate Tax/Personal Tax/Vat Law/Legal Information/Tax Information/Legal Services/Tax Services Tax Management India. Com / MS Knowledge Processing Pvt. Ltd. All rights reserved. One stop solution for Direct Taxes and Indirect Taxes https://www.taxtmi.com/caselaws?id=772645 https://www.taxtmi.com/caselaws?id=772645 Undervaluation of the goods cleared by BIPL occurred due to inadvertence or whether it was deliberate - suppression of material facts and contravention of the provisions of the Central Excise Act, 1944 or not - levy of penalty u/s 11AC of the Central Excise Act, 1944 - cenvat credit availed by WAL on the supplementary invoice of BIPL - ineligible availment of cenvat credit or not - HELD THAT:- The entire sequence of transactions have been elaborated in detail and we are satisfied that the appellant's adoption of the system generated cost of production for the items cleared to WAL as the provisional value, without recognizing the fact that the system while generating the cost of production for the said items did not take into consideration the anterior conversion charges at WAL which were hitherto being fed in consequent to their change from job work procedure to duty paid clearance procedure, was an entirely plausible inadvertent error. The appellant has also categorically averred in its reply that they have shown their bonafides by suo motu working out the differential duty liability and paying the same along with applicable interest before the issuance of the notice. It is also pertinent that when WAL was paying duty and clearing the goods to BIPL they were availing credit and subsequently when BIPL paid duty and returned the job worked items to WAL, they availed credit. Thus, while there has been a short payment of duty in the intermediate stage, equally it has only resulted in the respective party availing less credit and paying more duty in cash while clearing the hose assembly. Had the duty been paid on the correct value by BIPL, the same would have been availed as credit by WAL and used for payment of duty on the Hose Assembly cleared from their end. It is satisfied that the mistake that has resulted in understating the value is a Bonafide mistake without any intention to evade payment of duty. It is also noted that neither the SCN nor has the adjudicating authority too in the impugned Order in Original, attributed any positive or deliberate act of wilful misstatement or suppression of facts with intent to evade payment of duty on the part of the appellant. That is to say there is no evidence adduced by the Department that the mistake of BIPL which is claimed to be inadvertent, was in fact intentional - the Revenue has not discharged its burden of proving that the appellant had made these transactions with any malafide intent or with an intent to evade payment of duty. The finding of the adjudicating authority that since the appellant has not chosen to pay the 1% penalty prescribed under Section 11(6) of the CEA, 1944 it goes to prove wilful suppression and misstatement of facts with intent to evade payment of duty is literally turning the provision on its head. It is evident from a plain reading of the said Section 11(6) that it applies only to a person chargeable with duty under Section 11(5), which in turn is attracted only where during the course of any audit, investigation or verification, it is found that any duty has not been levied or paid or has been short levied or short paid for the reasons mentioned in clauses (a) to (e) of sub-section (4), namely the ingredients that are necessary to attract the invoking of extended period of limitation - in the absence of any of the aforesaid ingredients of sub-section (4) there was no necessity for the appellant to have paid the penalty stipulated under Section 11(6) and the finding of the adjudicating authority in this regard is unsustainable. The appellant BIPL has deliberately suppressed material facts and contravened the provisions of the CEA 1944 and the rules made thereunder with intend to evade payment of duty, and to impose equivalent penalty on the appellant, are wholly untenable. The adjudicating authority has erred in imposing equivalent penalty on the appellant in these facts and circumstances and it cannot sustain. Conclusion - i) The undervaluation by BIPL is inadvertent and bona fide. ii) Penalty under Section 11AC imposed on BIPL is set aside. iii) CENVAT credit availed by WAL on the supplementary invoice is lawful; and (4) Penalty imposed on WAL is set aside. Appeal allowed. Case-Laws Central Excise Wed, 11 Jun 2025 00:00:00 +0530