TaxTMI 
TaxTMI 
2009 (5) TMI 15
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....endra Textile Processors, 2008 (231) ELT 3 that mere non payment or short payment of duty (without anything else!) would inevitably lead to imposition of penalty equal to the amount by which duty was short paid. In our view the reason assigned by the Tribunal to strike down the levy of penalty against the assessees is as misconceived as the interpretation of Dharamendra Textile is misconstrued by the Revenue. We completely fail to see how payment of the differential duty, whether before or after the show cause notice is issued, can alter the liability for penalty, the conditions for which are clearly spelled out in section 11AC of the Act. 3. Though both the appeals turn on a question of law, it would be nevertheless useful to take a brief look at the facts of the two cases. 4. In the appeal arising from SLP (C) No.15927/2007 the respondent- assessee is a manufacturer of P/V yarn. On July 12, 2000 the Preventive Party of Central Excise Division, Udaipur visited the assessee's factory premises and on scrutiny of its internal records took the view that in clearances of goods on ex-mill sales there was short payment of duty by Rs. 1,09,682.00 and by Rs. 69,900.00 on sales ma....
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.... No. 4078/2008 is a company engaged in the manufacture of pig iron. The assessee sold pig iron and molten metal to another company called M/s. Lanco Kalahasthi Castings Limited (LKCL) which was in existence at the material time before its amalgamation with the respondent company, with effect from, April 8, 2004 as per the order of the Andhra Pradesh High Court, dated February 20, 2004 in Company Petition no. 182-83/ 2003. LKCL had its factory at a distance of about 150 metres from the assessee's factory where the pig iron and molten metal, on sale, were transferred for manufacture of ductile iron pipes by the transferee company. The sold goods were cleared from the factory of the assessee on payment of central excise duty on transaction value, that is, the price actually charged by it from LKCL. LKCL would get full CENVAT credit for the duty paid by the respondent company and would reimburse to the assessee the amount of duty at actuals. 7. The Central Excise officers on scrutiny of the annual record of the respondent for the period July 1, 2000 to March 31, 2004 took the view that the assessee had been clearing molten iron and pig iron to M/s. LKCL on an improper assessable....
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....llate Tribunal. The Tribunal allowed the appeal by its order dated September 5, 2006 as noted above. 9. On behalf of the assessees in both the cases it was submitted the stand of the Revenue that there was any short payment of duty and the consequent demand for recovery of the differential duty was quite untenable but the assessees had made payment of the demands simply in order to buy peace and to avoid any litigation. In those circumstances the imposition of penalty was wholly unjust, unwarranted and unauthorised in law. 10. Mr. Ashok Desai, learned Senior Advocate appearing for the assessee in the appeal arising from SLP (C) No. 4078/2008 submitted that the view taken by the Revenue that the assessee and LKCL, with respect to each other, were `related person' was quite unsound. Nevertheless, the assessee paid the entire demand of Rs. 1,26,09,437.00 first, in order to avoid litigation and secondly because the payment did not result in any actual monetary outflow for the assessee; whatever payment was made by the assessee, LKCL took CENVAT credit for it and reimbursed the full amount of duty to the assessee. He further submitted there was no question of suppression of an....
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....ct or of the rules made thereunder with intent to evade payment of duty, by such person or his agent, the provisions of this sub-section shall have effect, [as if ] for the words ["one year"], the words "five years" were substituted: Explanation. - Where the service of the notice is stayed by an order of a court, the period of such stay shall be excluded in computing the aforesaid period of [one year] or five years, as the case may be. [(1A) When any duty of excise has not been levied or paid or has been short-levied or short paid or erroneously refunded, by reason of fraud, collusion or any wilful misstatement or suppression of facts, or contravention of any of the provisions of this Act or the rules made thereunder with intent to evade payment of duty, by such person or his agent, to whom a notice is served under the proviso to sub-section (1) by the Central Excise Officer, may pay duty in full or in part as may be accepted by him, and the interest payable thereon under Section 11AB and penalty equal to twenty-five per cent of the duty specified in the notice or the duty so accepted by such person within thirty days of the receipt of the notice.] (2) The [Central Excise ....
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....t payment of duty, if any, which in his opinion has not been paid by such person and, then, the Central Excise Officer shall proceed to recover such amount in the manner specified in this section, and the period of "one year" referred to in sub-section (1) shall be counted from the date of receipt of such information of payment. Explanation 1. - Nothing contained in this sub-section shall apply in a case where the duty was not levied or was not paid or was short-levied or was short-paid or was erroneously refunded by reason of fraud, collusion or any wilful mis-statement or 1 2 suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty. Explanation 2.- For the removal of doubts, it is hereby declared that the interest under section 11AB shall be payable on the amount paid by the person under this sub-section and also on the amount of short-payment of duty, if any, as may be determined by the Central Excise Officer, but for this sub- section. (2C) The provisions of sub-section (2B) shall not apply to any case where the duty had become payable or ought to have been paid before the date on whic....
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....y is not levied or paid or short-levied or short-paid or erroneously refunded, it can be recovered by the appropriate officer within six months from the relevant date. (The expression `relevant date' is defined in the Section itself). But the said period of six months (substituted by one year with effect from May 12, 2000) gets extended to five years where such non- levy, short levy, etc., is "by reason of fraud, collusion or any wilful mis-statement or suppression of facts or contravention of any of the provisions of this Act or of the rules with intent to evade payment of duty.... "6. Now so far as fraud and collusion are concerned, it is evident that the requisite intent, i.e., intent to evade duty is built into these very words. So far as mis-statement or suppression of facts are concerned, they are clearly qualified by the word "wilful" preceding the words "mis-statement or suppression of facts" which means with intent to evade duty. The next set of words "contravention of any of the provisions of this Act or Rules" are again qualified by the immediately following words "with intent to evade payment of duty". It is, therefore, not correct to say that there can be a supp....
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....ithin thirty days of the date of receipt of notice then the proceeding against him would be deemed to be conclusive (without prejudice to the provisions of sections 9, 9A and 9AA) as provided in the proviso to sub-section 2 of section 11A. Sub section 1A and the proviso to sub section 2 were inserted with effect from July 13, 2006 and, therefore, have no application to the periods relevant to the two appeals. 15. Sub-section 2B of section 11A provides that in case the person in default makes payment of the escaped amount of duty before the service of notice then the Revenue will not give him the notice under sub section 1. This, perhaps, is the basis of the common though erroneous view that no penalty would be leviable if the escaped amount of duty is paid before the service of notice. It, however, overlooks the two explanations qualifying the main provision. Explanation 1 makes it clear that the payment would, nevertheless, be subject to imposition of interest under section 11AB. Explanation 2 makes it further clear that in case the escape of duty is intentional and by reason of deception the main provision of sub section 2B will have no application. 16. The other provision ....
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....(1) 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.] 17. The main body of sub-section 1 lays down the conditions and circumstances that would attract penalty and the various provisos enumerate the conditions, subject to which and the extent to which the penalty may be reduced. 18. One can not fail to notice that both the proviso to sub section 1 of section 11A and section 11AC use the same expressions: "....by reasons of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty,...". In other words the conditions that would extend the normal period of one year to five years would also attract the imposition of penalty. It, therefore, follows that if the notice under section 11A (1) states that the escaped duty was the result of any conscious and deliberate wrong doing and in the order passed under section 11A (2) there is a legally tenable finding to that effect then the....
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....s that said section should be read as penalty for statutory offence and the authority imposing penalty has no discretion in the matter of imposition of penalty and the adjudicating authority in such cases was duty bound to impose penalty equal to the duties so determined. The assessee on the other hand referred to Section 271(1)(c) of the Income Tax Act, 1961 (in short the `IT Act') taking the stand that Section 11AC of the Act is identically worded and in a given case it was open to the assessing officer not to impose any penalty. The Division Bench made reference to Rule 96ZQ and Rule 96ZO of the Central Excise Rules, 1944 (in short the `Rules') and a decision of this Court in Chairman, SEBI vs. Shriram Mutual Fund & Anr. [2006(5) SCC 361] and was of the view that the basic scheme for imposition of penalty under section 271(1)(c) of IT Act, Section 11AC of the Act and Rule 96ZQ(5) of the Rules is common. According to the Division Bench the correct position in law was laid down in Chairman, SEBI's case (supra) and not in Dilip Shroff's case (supra). Therefore, the matter was referred to a larger Bench." After referring to a number of decisions on interpretation ....