AI Drafter 
TaxTMI 
TaxTMI 
2024 (6) TMI 126
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....y the appellant on the intermediary goods are available as Cenvat credit for the recipient units situated at Pimpri and Goa. However, no Cenvat credit was availed in respect of Roorkee plant as a said unit was availing area based duty exemption. For determining the assessable value of intermediate goods, the appellant has adopted the cost of production on a monthly basis and made statutory addition of 10% to the base value and paid the duty on such provisionally determined value. Upon ascertaining the audited cost report in the month of October/November of each year and after obtaining the CAS-4 certificate indicating the actual value of such intermediate goods, the appellant discharges the differential duty, if any, with appropriate interest as per law. The appellant had also informed the Department about the aforesaid practice of duty payment on intermediate products by their letter dated 23.03.2011. 2.2 However, the Department objected to such practice adopted by the appellant and issued show cause notice dated 06.05.2013 demanding differential Central Excise duty of Rs.78,67,377/- under Section 11A(4) of the Central Excise Act, 1944 along with applicable interest, besides pr....
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....of differential duty of Rs.78,67,377/-, which, in the absence of any final CAS-4 certificate at the material time, was worked out on the basis of notional 15% addition to the provisional assessable value calculated by the assessee, would no more hold good. Consequently, the same needs to be reduced to the extent of differential duty worked out on the basis of final CAS-4 certificates, which are now on record. The assessee have already calculated and paid the differential duty along with interest based upon the final CAS-4 certificates issued by an independent Cost Accountant which stands verified by the jurisdictional Assistant Commissioner of Central Excise and therefore, I find no reason to differ from the same. xx xx xx xx xx 20.4... Although, subsequent to the receipt of the final CAS-4 certificates, the assessee have determined their differential duty liability and paid the same along with interest, I find that at the time of clearance of such goods to their sister units, the assessment of such goods was undisputedly improper and incorrect and was deliberately done with an intent to evade duty, and hence there is a wilful misstatement about the assessable val....
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....944 is not sustainable. 5.1 I further find that the above issue for consideration before me is no more open to debate, as the issue has been discussed at length and was decided by the Hon'ble High Court of Gujaratin the case of Commissioner of Central Excise & Customs, Bhavnagar Vs. Saurashtra Cement Ltd. - 2010 (260) E.L.T. 71 (Guj.).The relevant paragraphs of the said judgement are extracted and given below: "15. For appreciating the controversy between the department and assessee, it is necessary to have a close look at the relevant provisions of Central Excise Act as well as Rules. The dispute centers around the applicability of Rule 25 of the Central Excise Rules. It reads as under :- Rule 25. Confiscation and penalty. - (1) subject to the provisions of section 11AC of the Act, if any producer, manufacturer, registered person of a warehouse or a registered dealer,- (a) removes any excisable goods in contravention of any of the provisions of these rules or the notifications issued under these rules; or (b) does not account for any excisable goods produced or manufactured or stored by him; or (c) engages in the manufacture, product....
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..............". Section 11AC of the Central Excise Act deals with penalty for short levy or non-levy of duty in certain cases. It says that where any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded by reasons of fraud, collusion or any willful misstatement 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, the person who is liable to pay duty as determined under sub-section (2) of Section 11AC, shall also be liable to pay a penalty equal to the duty so determined. For the purpose of invoking Section 11AC of the Act, the condition precedent is that the duty has not been levied, or paid or short-levied or short-paid or the refund is erroneously granted by reasons of fraud, collusion or any willful misstatement or suppression of facts. If these ingredients are not present, penalty under Section 11AC cannot be levied. Since Rule 25 can be invoked subject to the provisions of Section 11AC of the Act, as a natural corollary, the ingredients mentioned in Section 11AC are also required to be considered while determining the question of lev....
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....des for imposition of penalty when there is failure to pay duty within the statutorily prescribed period, such imposition of penalty should be preceded by a finding that there was a willful default as such and in the case before the Kerala High Court, the deficit duty had been paid along with interest even before the issuance of the show-cause notice. The appellate authority had also found absence of any intention to evade payment of duty. The Court, therefore, took the view that the orders of penalty were not sustainable and rightly interfered with by the learned single judge. 20. Even in the case of Supreme Industries Limited v. CESTAT, New Delhi (supra), the Madhya Pradesh High Court took the view that enforcement of penal clause to be done subject to strict proof of intention to evade payment of duty. In the case before the Madhya Pradesh High Court, there was no material to show that there was intention to evade duty. The goods manufactured were not subject to quality control test and were kept on hold. The goods were to be cleared by quality control department and only thereafter were to be sent to packing department after quality control test was concluded. Merely b....
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....t whether in the rules or in the license itself; that is, a licensee is exempt from assessment as long as he conforms to the conditions of licence and not that he is entitled to exemption whether the conditions upon which the license is given are fulfilled or not. The use of the words "subject to" has reference to effectuating the intention of the law and the correct meaning, is "conditional upon". The observance of conditions of licence is necessary for the availability of exemption under Section 5. Where the licensee contravenes the conditions of the licence or Act or the rules, he becomes liable to pay the tax, notwithstanding that a license is issued to him under Section 5. 24. In view of the above discussion and legal position emerging therefrom, we have no hesitation in confirming the orders passed by the Tribunal and dismissing all these Appeals filed by the Revenue, by holding that there was no intention on the part of the respondent assessee to evade any payment of duty. It is only because of stringent financial condition, that the duty could not be paid in time and as soon as liquidity was available, duty was paid along with interest. The Tribunal has, therefore,....
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....ng the disputed period, the appellant had prepared the cost sheet as per CAS-4 guidelines, reflecting the material particulars regarding clearance of excisable goods to the sister's unit. Further, the letter dated 31-5-2007 annexed at page 305 in the appeal records also demonstrates the fact that for the purpose of audit under the EA-2000, the department had sought for submission of desired documents, which were duly complied with by the appellant. The impugned order at Page 32 has also acknowledged the fact that the books of accounts with regard to the present dispute were examined and verified by the audit wing of both the aforementioned departments. However, the present show cause proceedings were initiated by the department vide notice dated 15-3-2010, alleging that the appellant had suppressed the material particulars regarding non-observance of the procedures laid down under Rule 8 ibid and thus, it is liable to pay the differential duty under the proviso to Section 11A ibid. On perusal of the relevant records, we are convinced that the appellant had informed the department regarding the modus operandi adopted by it in sending the disputed goods to its sister's units and also....
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....at when the entire exercise was revenue neutral, the appellant could not have achieved any purpose to evade the duty. Thus, in absence fulfilment of the ingredients mentioned in the proviso clause to Section 11A ibid, confirmation of the adjudged demands in the impugned order will not stand for judicial scrutiny. The issues decided in the case laws relied upon by the Ld. AR for Revenue are distinguishable from the facts of the present case. In the case of Neminath Fabrics Pvt. Ltd. (supra), the respondent had admitted shortage of the finished products and illicit clearance thereof without issuance of Central Excise invoices, without payment of Central Excise duty. Appreciating the evidence, it was held by the Hon'ble Gujarat High Court that when suppression stands admitted and proved the proviso to sub-section (1) of Section 11A ibid would stand attracted. In the case of Tigrania Metal & Steel Industries (supra) and Chemfab Alkalis Ltd. (supra), this Tribunal has held that when the Department officers were not aware of the facts, which were intentionally suppressed by the assessee, mere conducting the audit cannot prevent the departmental action in not issuing the show cause notice....