Custom, Excise & Service Tax Tribunal
Commissioner Of Central Excise, ... vs M/S Sudarshan Chemical Industries Ltd on 5 November, 2009
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
COURT NO. II
Appeal No. E/517/08
E/CO/98/08
(Arising out of Order-in-Appeal No. P-III/PAP/135/08 dated 29.2.2008 passed by the Commissioner of Central Excise (Appeals), Pune-III).
For approval and signature:
Honble Shri P.G. Chacko, Member (Judicial)
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1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982? 2. Whether it should be released under Rule 27 of the : No CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not? 3. Whether their Lordships wish to see the fair copy : Seen of the order? 4. Whether order is to be circulated to the Departmental : Yes authorities? ====================================================== Commissioner of Central Excise, Pune-III Appellant Vs. M/s Sudarshan Chemical Industries Ltd. Respondents Appearance: Shri Kishori Lal SDR for Appellant Ms. Aparna Hirandagi with Shri S.S. Mani Prakash Advocate Consultant for Respondents CORAM: SHRI P.G. CHACKO, MEMBER (JUDICIAL) Date of Hearing: 05.11.2009 Date of Decision: 05.11.2009 ORDER NO. WZB/MUM/2009 Per: P.G. Chacko
In adjudication of show-cause notice dated 30.5.2006, the original (adjudicating) authority confirmed a demand of differential duty against the assessee for the period 1.4.2003 to 4.8.2003. It also demanded interest on duty under Section 11AB of the Central Excise Act, 1944. The amounts of duty and interest earlier paid by the assessee were appropriated by the adjudicating authority. No penalty was imposed under Section 11AC or Rule 25 on the assessee, against which the department preferred an appeal to the Commissioner (Appeals), but the same was rejected. The present appeal of the Revenue is against the appellate Commissioners order. The short question to be considered in this appeal is whether on the facts of this case, Section 11AC is invocable against the respondent.
2. After examining the records and hearing both sides, I have found this to be a case fit for remand. In the show-cause notice, it was alleged that the assessee had contravened the provisions of Section 4(b) of the Central Excise Act and Rule 8 of the Central Excise (Valuation) Rules by not determining the correct value of the excisable goods cleared from their factory to a sister unit for captive consumption. Elsewhere in the show-cause notice, the department alleged that the assessee had intention to evade payment of interest on duty. The substantive fact as stated in the show-cause notice is that the assessee had worked out the assessable value of the goods @110% of the cost of production under Rule 8 for the aforesaid period, whereas they ought to have calculated the value @ 115% of the cost of production. Some time in November, 2004, when pointed out by Internal Auditors of the department, they paid the differential duty. Subsequently, they paid interest thereon also. Obviously, the show-cause notice was issued to appropriate these payments towards duty and interest and to impose penalty on the assessee under Section 11AC. In their reply to the show-cause notice, the assessee submitted that they had not contravened Rule 8 as the case did not involve any captive consumption. They also submitted that, as they paid the differential duty voluntarily before issuance of show-cause notice, there could be no penalty on them, nor could any interest be levied. Before the appellate authority also, the assessee maintained the same stand. The appellate authority has decided in their favour. In the present appeal of the Revenue, the contention raised is for imposition of penalty equal to duty on the respondent under Section 11AC. Case law has been cited in support of this prayer. Today, the learned SDR has relied on the Honble Supreme Courts judgment in Union of India Vs. Rajasthan Spinning & Weaving Mills 2009-TIOL-630SC-CX, wherein the scope of Section 11AC was examined and, in that context, their Lordships held thus:
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. The learned SDR has also relied on Honble High Courts judgment in Commissioner of Central Excise & Customs Vs. Shri Ram Aluminium P. Ltd. 2009 TIOL-358-HC-MUM-CX, wherein one of the issues considered by the High Court was whether in case of clandestine removal of goods the payment of part of duty subsequently made on notice by the department prior to issue of show-cause can discharge the Respondent from the rigour of provisions of Section 11AC of Central Excise Act, 1944? This question was answered in the negative in favour of the Revenue.
3. The learned Counsel for the respondent submits that they had no intention to evade payment of duty inasmuch as CENVAT credit of any duty paid by them would have been available to their sister unit. It is also submitted that, after appreciating the evidence available on record, both the lower authorities found in their favour. It is claimed that, in the present appeal, there is no effective challenge against such findings. On my part, I find that the present endeavour of the respondent is to rule out intention to evade duty on the ground that any duty paid by them would have been available as CENVAT credit to their sister unit. This has never been a plea before any of the lower authorities. This is a new plea. However, I find that neither of the lower authorities cared to examine the question whether the facts required for supporting the departments allegation that the assessee had contravened legal provisions with intent to evade payment of duty were pleaded in the show-cause notice. According to the Honble Supreme Courts ruling in Rajasthan Spinning & Weaving Mills case, such facts should be clearly alleged in the show-cause notice and proved. For a penalty under Section 11AC, the department should allege and prove that the assessee committed fraud or colluded with someone or indulged in willful suppression or misstatement of facts or contravened specific provisions of law with intent to evade payment of duty. Then only can a penalty be imposed on the assessee under Section 11AC. Of course; the penalty will be equivalent to the duty sought to be evaded. It appears, before the lower authorities, the department failed to discharge this burden of proof. In the interest of justice, I would give them one more opportunity. Accordingly, after setting aside the orders of the lower authorities (except in respect of duty and interest), I direct the original authority to pass fresh order on the penalty-related issue in accordance with law and the principles of natural justice. It will be open to the assessee, if so advised, to make additional submissions against the departments allegation that they contravened certain provisions of law with intent to evade payment of duty. The case law cited by the learned SDR shall also be considered by the adjudicating authority. The appeal stands allowed by way of remand.
(Dictated and pronounced in Court) (P.G. Chacko) Member (Judicial) Vks/ 1