TaxTMI 
TaxTMI 
2017 (6) TMI 576
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.... and for imposing penalty. The assessee replied, accepting duty liability but contesting the proposal to levy interest and to impose penalty. In adjudication of the dispute, ld. Commissioner passed the impugned order, wherein demand of duty of Rs. 60,18,344/- was confirmed against the assessee under the proviso to Section 11A (A) of the Central Excise Act, 1944 (hereinafter referred to as the Act") for the aforesaid period. Interest was also demanded under Section 11AB of the Act and penalty equal to duty was imposed under Section 11AC of the Act. The appellants have paid the entire amount of duty demanded by the Commissioner. 2. It is the contention of Shri G.Natarajan, ld. Advocate for the appellant, that the demand of duty, interest and penalty relates to the period Feb. 03 Nov. 04. Appellant was paying duty on the value of the goods cleared before CAS-4 was introduced to determine the assessable value of the goods manufactured. The CAS -4 was prescribed by Board s Circular dated 13.02.2003. The goods earlier cleared to the job workers were without following CAS-4 guidelines since that costing standard was made applicable during the end of the Financial Year 2003-04. 2.2 R....
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....leared following CAS-4, the appellant has deliberately not paid duty element for the period April 2003 to September 2004 till 18.01.2005, in terms of that cost standard itself indicates that the elements of section 11AC are present having undervalued the assessable value of goods cleared intentionally. Therefore, the authority rightly imposed penalty following the decision of the apex court in the case of Rajasthan Spinning & Weaving Mills cited above. 4. Heard both sides and perused the records. The issue that comes up for decision is on a short compass namely, that whether the duty liability was short paid before issue of the show cause notice on 05.01.2006, whether penalty is imposable on the appellants under Section 11AC of the Central Excise Act and whether there was deliberate undervaluation of goods for the material period, without following CAS-4. 5. To understand this issue, it would be useful to reproduce the provisions of Section 11AC as it existed during the period of dispute. Section 11AC was inserted in the Central Excise Act, 1944 w.e.f. 28.09.1996 by Section 76 of the Finance (No.2) Act, 1996 (33 of 1996). It was amended w.e.f. 12.05.2000 by Section 100 of the....
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....the Finance Act, 2000 receives the assent of the President; (2) any amount paid to the credit of the Central Government prior to the date of communication of the order referred to in the first proviso or the fourth proviso shall be adjusted against the total amount due from such person." [Emphasis added] 6. Section 11AC of the Act provides for levy of quantum of penalty equal to duty evaded, in the circumstances prescribed by that section. The moot question is whether on the issues as framed under para-4 aforesaid, whether the duty liability evaded paid up before issue of show cause notice, warrant levy of penalty equal to the amount of duty under Section 11AC ibid. 7. Applying the principles of interpretation to the Section 11AC ibid, the following will emerge : i) The intention of Legislature: The section 11AC as mentioned above was inserted w.e.f. 28.09.1996 by Section 76 of the Finance Act, 1996. While commending to the legislature in the Central Excise Act, 1944,in the course of presentation of the Union Budget 1996 and Finance Bill, 1996, the relevant portion of the Budget Speech to this proposal is reproduced below :- "I am proposing....
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....by adopting any of the means mentioned in the Section. Therefore, the contention of the appellant that the duty was paid prior to issuance of show cause notice does not in any manner advance its case. The question that has to be considered is whether there is intention to evade payment of duty. The period which is subject matter of issue was 2001-02. The Enforcement Wing of the respondent Department visited the appellant s factory on 23-12-2003 i.e., nearly after about two years after the relevant period i.e. 2001-02. In the course of such surprise inspection, the stock was verified and the accounts of the appellant were scrutinized. On such verification and scrutiny, it came to light that the appellant adopted a notional price in respect of consignment sales and they had admitted that there was some delay in receipt of sale patties from the consignment agents and the Director of the Company admitted the liability and accepted to pay the differential duty. The Original Authority after considering the materials placed before him pointed out that as declared in the invoices that the removals specified in the notice are towards consignment agents, the responsibility of paying differen....
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....ould not apply to every case of non-payment or short payment of duty but conditions mentioned in Section 11AC ibid should exist for penalty thereunder. However, once Section 11AC is applicable, there would be no discretion available on quantum and penalty equal to duty may be imposed thereat. Relevant part of the said judgement is reproduced as under : "23.. The decision in Dharamendra Textile must, therefore, be understood to mean that though the application of Section 11AC would depend upon the existence or otherwise of the conditions expressly stated in the section, once the section is applicable in a case the concerned authority would have no discretion in quantifying the amount and penalty must be imposed equal to the duty determined under sub-section (2) of Section 11A. That is what Dharamendra Textile decides." 8.4 The Hon'ble Apex Court in the Rajasthan Spinning judgment also clarified that payment of duty before or after notice cannot alter liability to penalty to Section 11AC, if applicable, observing as under : "2.. What are the conditions and the circumstances that would attract the imposition of penalty under Section 11AC of the Central Excise ....
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....d held that the law laid down in the case of Dilip N. Shroff (supra) isnot correct whereas the law laid down in the case of SEEI (supra) is correct. The following observations of Their Lordships are apposite which reads as under: "15. The stand of learned counsel for the assessee is that the absence of specific reference to mens rea is a case of casus omissus. If the contention of learned counsel for the assessee is accepted that the use of the expression "assessee shall be liable" proves the existence of discretion, it would lead to a very absurd result. In fact in the same provision there is an expression used i.e. "liability to pay duty". It can by no stretch of imagination be said that the adjudicating authority has even a discretion to levy duty less than what is legally and statutorily leviable......." "19. In Union Budget of 1996-1997, Section llAC of the Act was introduced. It has made the position clear that there is no scope for any discretion. In Para 136 of the Union Budget reference has been made to the provision stating that the levy of penalty is a mandatory penalty. In the Notes on Clauses also the similar indication has been given. 20. Ab....
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.... 22 months which resulted in differential duty liability amounting to Rs. 60,18,344/-. Non-adoption of the CAS-4 value resulted in undervaluation of the assessable value. 9.5 Notwithstanding the guidelines on the manner of calculation of assessable, as per CAS-4, issued by Board on 13.02.2003, appellant did not adopt CAS-4 valuation. When any new procedural requirement is introduced, there would always be a transition period wherein the assessees may have some confusion or doubt on the procedural requirement. This is understandable. However, we certainly cannot relate to the contention of the appellant that delay in switching over to CAS-4 valuation was due to the reason that they had to collect particulars/details as per the CAS-4 method. A continued hiatus of "twenty two" months can in no way explain the conduct of the appellant. Discernably therefore, the appellants knowingly and willfully adopted lesser assessable/transaction value in contravention of Rules 4 & 8 of Central Excise (Valuation) Rules, 2000 read with Rule 8 of Central Excise (Valuation)Rules, 2000. Such undervaluation over a period of one and half years resulting in evasion of duty of Rs. 60,18,344/- calls for ....