Custom, Excise & Service Tax Tribunal
Audco India Ltd vs Commissioner Of Central Excise on 23 February, 2015
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
SOUTH ZONAL BENCH AT CHENNAI
Appeal No.E/373/2000
[Arising out of Order-in-Original No.5/2000 dated 4.2.2000 passed by the Commissioner of Central Excise, Chennai]
Audco India Ltd.
Appellant
Versus
Commissioner of Central Excise,
Chennai Respondent
Appearance:
Shri Minchu Merian Punnouse, Advocate For the Appellant Shri M. Rammohan Rao, DC (AR) For the Respondent CORAM:
Honble Shri R. Periasami, Technical Member Date of hearing : 7.11.2014 Date of Pronouncement : 23.2.2015 FINAL ORDER No.40174/2015 This appeal is taken up for de novo consequent upon the order of Hon'ble High Court of Madras dt. 11.9.2009 in C.M.A.No.1370 of 2007.
2. The brief facts of the case are that appellants are manufacturers of industrial valves falling under Chapter 84. On investigation by the department, it came to light that they have not paid appropriate excise duty on the scrap generated at the job worker premises from the goods sent and processed under rule 57F (4) of Central Excise Rules, 1944 and they also removed capital goods to their job workers premises without reversal of credit. Hence, show cause notice dt. 19.4.99 was issued to the appellants demanding duty with interest and penalty thereon. The adjudicating authority in the order dt. 4.2.2000 confirmed the duty demand of Rs.15,53,996/- under proviso to Section 11A(1) of Central Excise Act and appropriated the entire duty amount already paid by them towards the demand. He also confirmed the reversal of credit of Rs.1,71,091/- under Rule 57U (2) and vacated the protest of the appellant when they paid the said amount. He imposed penalty of Rs.8,52,254/- equivalent to the duty payable after 28.9.1996 under Section 11AC and also demanded interest under Section 11AB in respect of duty of Rs.8,52,254/-. The adjudicating authority also imposed penalty of Rs.1,63,815/- equivalent to the ineligible credit taken after 28.9.96 under Rule 57U(6) and also demanded interest under Rule 57U(8). He also imposed penalty of Rs.1 lakh under Rule 173Q of Central Excise Rules.
3. Aggrieved by the aforesaid order, appellant preferred appeal before this Tribunal. The Division Bench of this Tribunal vide Final Order No.1094/2006 dt. 15.11.2006 upheld the demand and set aside the penalties imposed under Section 11AC, 57U and 173Q and also set aside the interest demanded under Section 11AB and under Rule 57U (8) as no penalty can be imposed for the period prior to 28.9.96, the date on which Section 11AC came into force.
4. Aggrieved by the Tribunal's order, Revenue filed C.M.A before the Hon'ble High Court of Madras and the Hon'ble Court vide Order dt.11.9.2009 in C.M.A.No.1370/2007 set aside the Tribunal's order dt. 15.11.2006 and remitted back the matter to the Tribunal.
5. Heard both sides.
6. Ld. Advocate for the appellant submits that they have paid the entire duty amount and also reversed the credit on the capital goods before issue of show cause notice. On the 11AC penalty, he submits that immediately on receipt of the Hon'ble High Court's order dt. 11.9.2009 they have paid a sum of Rs.2,79,017/- towards 25% of the total penalty of Rs.11,16,069/- within 30 days of receipt of Hon'ble High Court's order. He relied on the following case laws :-
(1) CCE Chennai-III Vs Motherson Sumi Systems Ltd.
2014 (301) ELT 225 (Mad.) (2) CCE,CC & ST, Vapi Vs Union Quality Plastics 2013 (291) ELT 322 (Guj.) (3) Audco India Ltd. Vs CCE Chennai 2013 (297) ELT 374 (Tri.-Chennai) (4) K.P.Pouches (P) Ltd. Vs Union of India 2008 (228) ELT 31 (Del.) He submits that in view of High Court's order (supra) and the Tribunal (supra), payment of 25% of penalty after receipt of the Hon'ble High Court's order is to be considered as valid and they have complied with the penalty as per Section 11AC as the amount was paid within 30 days of receipt of Hon'ble High Court's order.
7. On the other hand, Ld. A.R for Revenue reiterated the findings of the order and Hon'ble Court's order dt.11.9.2009. He further submits that the adjudicating authority has rightly imposed penalty under Section 11AC prospectively for the post-28.9.1996 only after the provisions of Section 11AC came into effect. As per the provisions of Section 11AC, the appellants are eligible for the payment of 25% of penalty provided they have paid the entire duty confirmed under Section 11 and interest payable thereon under Section 11AB is paid within a period of 30 days. The appellants are not eligible for the 25% of penalty as they have paid 25% only after receipt of the Hon'ble High Court's and they have not paid the 25% penalty within 30 days of receipt of the adjudication order as envisaged under proviso to Section 11AC. He further submits that the adjudicating authority has rightly imposed penalty under Section 11AC as suppression of facts has been established. Since the appellants have not fulfilled the condition stipulated in Section 11AC, they are not eligible to 25% of penalty paid after receipt of the High Court order. He relied on the following judgements :-
(1) CCE Raigad Vs Castrol India Ltd.
2012 (286) ELT 194 (Bom.) (2) CCE Pune Vs SKF India Ltd.
2009 (239) ELT 385 (SC) (3) Union of India Vs Dharamendra Textile Processors 2008 (231) ELT 3 (SC) (4) Arun Vypar Udyog Pvt. Ltd. Vs CESTAT Chennai 2014 (306) ELT 130 (Mad.)
8. I have carefully considered the submissions of both sides and perused the records. This remand proceedings is taken up as the Hon'ble High Court of Madras vide order dt.11.9.2009 allowed the Revenue appeal and set aside this Tribunal's Final Order No.1094/2006 dt. 15.11.2006 and remanded to the Tribunal to consider the penalty imposed under Section 11AC and Rule 57U and the interest demanded under Section 11AB in the light of Hon'ble Apex Court's judgement in CCE Vs SKF India Ltd. 2009 (239) ELT 385 (SC) as the adjudicating authority has imposed penalty under Section 11AC and under Rule 57U only for the period from 28.9.96 when the provisions of Section 11AC came into effect. The relevant paragraph of the Hon'ble High Court's order is reproduced as under :-
"4. Again, the Supreme Court explained the legal position in the case of Commissioner of Central Excise, Pune v SKF India Ltd. (2009 (239) ELT 385) by referring to Section 11A, 11AA, 11AB and 11AC. The Apex Court observed that if the object of the law is to state clearly and unambiguously the obligations of the person whom the law addresses and to spell out plainly and without any confusion the consequences of failure to discharge the obligations cast by the law, then the four sections of the Act fall miles short of the desired objective. Even as originally cast, the provisions were for from very happily framed and worded. Subjected to amendments from time to time those provisions have now become so complicated that in order to discern their meaning, it becomes necessary to read them back and forth several times. There is no reason why the two periods for which interest is leviable may not be put together and dealt with in one consolidated provision instead of being split up in sections 11AA and 11AB. The Supreme Court was also of the view that there is much scope to reorganize all the different subsections of Section 11A and to present the scheme of that section in a more coherent and readable form. The Apex Court further held as hereunder:-
10.?Sub-section (2B) of Section 11A provides that the assessee in default may, before the notice issued under sub-section (1) is served on him, make payment of the unpaid duty on the basis of his own ascertainment or as ascertained by a Central Excise Officer and inform the Central Excise Officer in writing about the payment made by him and in that event he would not be given the demand notice under sub-section (1). But Explanation 2 to the sub-section makes it expressly clear that such payment would not be exempt from interest chargeable under Section 11AB, that is, for the period from the first date of the month succeeding the month in which the duty ought to have been paid till the date of payment, of the duty. What is stated in Explanation 2 to sub-section (2B) is reiterated in Section 11AB that states where any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded, the person who has paid the duty under sub-section (2B) of Section 11A, shall, in addition to the duty, be liable to pay interest .......It is thus to be seen that unlike penalty that, is attracted to the category of cases in which the non-payment or short payment etc. of duty is by reason of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of the Act or of Rules made thereunder with intent to evade payment of duty, under the scheme of the four Sections (11A, 11AA, 11AB & 11AC) interest is leviable on delayed or deferred payment of duty for whatever reasons.
11.?The payment of differential duty by the assessee at the time of issuance of supplementary invoices to the customers demanding the balance of the revised prices clearly falls under the provision of sub-section (2B) of Section 11A of the Act.
5. Having regard to the submission made and also in view of the decision of the Supreme Court cited above, the order of the Tribunal set aside and the matter is remitted back for the Tribunal to consider the issue in the light of the above cited Judgment of the Supreme Court."
9. On perusal of the records and the impugned order, I find that the adjudicating authority confirmed the demand of excise duty of Rs.15,53,996/- and reversal of credit of Rs.1,71,901/- but restricted the penalty to Rs.8,52,254/- and Rs.1,63,850/- under Section 11AC equivalent to the duty payable after 28.9.96. On perusal of the SCN dt. 19.4.99, it is seen that the Department initiated detailed investigations on 3.3.1999 and recorded statements and detected non-payment of excise duty on scrap cleared from the job worker premises and also detected clearance of capital goods without reversal of credit during the period 1994-95 to 1998-99. The suppression of facts with deliberate intention to evade payment of duty has been clearly brought out in the findings of the adjudication order. It is evident from the records that the appellants have paid the duty only on 9.3.99 i.e. after the department detected the duty evasion. Since the suppression of facts is established beyond doubt the adjudicating authority has rightly invoked Section 11AC and Section 11AB for imposition of penalty and the interest and rightly restricted the penalty under Section 11AC and interest under Section 11AB only on the demand amount covered for the period from 28.9.1996. As held by the apex court in the case of UOI Vs Dharmendra Textile Processors once mens rea with intention to evade payment of duty is established, appellants are liable for mandatory penalty and interest under Section 11AB. The Hon'ble High Court of Madras in the case of Arun Vyapar Udyog Pvt. Ltd. (supra) has held that once the intention of the assessee to evade payment of duty is established, penalty under Section 11AC is imposable. Relevant part of the above order is reproduced as under :-
"5.?We have considered the rival submissions and perused the materials available on record.
6.?The Honourable Supreme Court in the decision of Union of India (supra) held that payment of differential duty, whether before or after the show cause notice is issued, cannot alter the liability for penalty and the condition for which are clearly spelt out in Section 11AC of the Central Excise Act. The Honourable Supreme Court pointed out that penalty under Section 11AC of the Central Excise Act, as the word suggest, is punishment for an act of deliberate deception by the assessee with the intent to evade duty 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 appellants 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 differential duty lies with the noticee. The Original Authority further pointed out that when the appellant was conscious of the notional value for sale towards consignment agent, the responsibility of paying differential duty is rest on the appellant. More so, when they had earlier been paying differential duty for such consignment sales, the plea of the assessee was liable to be rejected. Admittedly, the matter would not have come to light but for the surprise inspection done by the Enforcement Wing of the respondent Department. If it was a genuine case where the appellant could not remit the differential duty on account of delay in receipt of sale patties, as soon as they have been received they ought to have remitted the differential duty. But that was not done and they intentionally withheld payment of differential duty for the subsequent period which clearly established that there was wilful intention to evade payment of duty.
7.?In the light of the above discussion, the question of law raised by the appellant viz., whether penalty and interest are leviable when duty has been paid before issuance of show cause notice has to be necessarily answered against the appellant in the light of the judgment of the Supreme Court in Union of India v. Rajasthan Spinning & Weaving Mills [2009 (238) E.L.T. 3 (S.C.)]. As regards the contumacious conduct of the appellant in wilfully evading payment of duty, we find no reason to interfere with the factual finding recorded by the Appellate Authority and confirmed by the Tribunal."
The ratio of the above Hon'ble High Court is squarely applicable to the present case.
10. In view of the Hon'ble High Court of Madras above and the Hon'ble Apex Court's decision in the case of SKF India Ltd., I hold that the demands confirmed by the Lower Authority is liable to be upheld and the appellants are liable for penalty under Section 11AC and liable for interest under Section 11AB and under Rule 57 U (6) and Rule 57U (8) of CER prospectively for the demand amount covered from 28.9.96.
11. Having upheld the demand and 11AC penalty and 11AB interest, the only issue remains to be discussed is whether the amended provisions of Section 11AC of the Act for availing 25% penalty is applicable to the present case. The appellants pleaded that they have paid Rs.2,79,017/- out of total penalty of Rs.11,16,069/- within 30 days of Hon'ble High Court's order dt. 11.9.2009 and complied 25% of penalty as per provisions of Section 11AC. They produced copy of letter dt. 19.11.99 addressed to Superintendent of Central Excise informing the payment. In the present case, the period involved is 1994-95 to 1998-99 and the impugned OIO passed on 4.2.2000. The Section 11AC as inserted by Finance Act, 1996 w.e.f. 28.9.96 is reproduced below :-
"Section 11AC. Penalty for short-levy or non-levy of duty in certain cases. 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 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, the person who is liable to pay duty as determined under sub-section (2) of section 11A, shall also be liable to pay a penalty equal to the duty so determined :
Provided that where the duty determined to be payable is reduced or increased by the Commissioner (Appeals), the Appellate Tribunal or, as the case may be, the court, then, for the purposes of this section, the duty as reduced or increased, as the case may be, shall be taken into account."
Subsequently, Section 11AC aas amended by the Finance Act, 2000 w.e.f. 12.5.2000 which reads as under :-
"Section 11AC. Penalty for short-levy or non-levy of duty in certain cases. 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 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, the person who is liable to pay duty as determined under sub-section (2) of section 11A, shall also be liable to pay a penalty equal to the duty so determined :
Provided that where such duty as determined under sub-section (20 of section 11A, and the interest payable thereon under section 11AB, is paid within thirty days from the date of communication of the order of the Central Excise Officer determining such duty, the amount of penalty liable to paid by such person under this section shall be twenty-five percent of the duty so determined :
Provided further that the benefit of reduced penalty under the first proviso shall be available if the amount of penalty so determined has also been paid within the period of thirty days referred to in that proviso:
Provided that where the duty determined to be payable is reduced or increased by the Commissioner (Appeals), the Appellate Tribunal or, as the case may be, the court, then, for the purposes of this section, the duty as reduced or increased, as the case may be, shall be taken into account :
Provided also that in case where the duty determined to be payable is increased by the Commissioner (Appeals), the Appellate Tribunal or, as the case may be, the court, then, the benefit of reduced penalty under the first proviso shall be available, if the amount of duty so increased, the interest payable thereon and twenty-five percent of the consequential increase of penalty have also been paid within thirty days of the communication of the order by which such increase in the duty takes effect.
Explanation - For the removal of doubts, it is hereby declared that -
(1) the provisions of this section shall also apply to cases in which the order determining the duty under sub-section (2) of section 11A relates to notices issued prior to the date on which 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. As seen from the above, the Section 11AC came into effect from 28.9.96. Subsequently, w.e.f. 12.5.2000, Section 11AC was amended where provisos were inserted extending payment of 25% of penalty. The amended Section 11AC, the 1st and 2nd proviso clearly mandates that appellants shall be eligible for penalty of 25% of the duty determined within 30 days of the communication of the order of the Central Excise Officer determining such duty together with interest payable under Section 11AB also to be paid within 30 days. Whereas in the present case, the appellants have not complied the provisions of Section 11AC as they have not paid the interest demanded under Section 11AB and the reduced penalty within 30 days of the communication of the adjudication order. Appellant's case is not covered under 3rd proviso of Section 11AC as this is not the case when the Tribunal or Hon'ble High court reduced or enhanced the penalty. The Hon'ble High Court in their order dt.11.9.2009 has set aside the order of Tribunal and remanded the case to the Tribunal. The letter dt. 19.11.2009 addressed to Superintendent of Central Excise Range informing that they have remitted Rs.2,79,017/- towards 25% of total penalty under Section 11AC under protest after receipt of Hon'ble High Court order is not acceptable. Appellants relied the Hon'ble High Court order in the case of Audco India Ltd. Vs CCE (supra), CCE Chennai Vs Motherson Sumi Systems Ltd. (supra) and Hon'ble Gujarat High Court decision in CCE & ST Vapi Vs Union Quality Plastics (supra) and the Tribunal's decision. In the above case laws, the Hon'ble High Court's and Tribunal extended the reduced penalty of 25% under Section 11AC only on the ground that the adjudicating authority has not extended the option of reduced penalty in the order. The said case law is not applicable to the present case as when the adjudication order passed on 14.2.2000 there was no such provision existed in the Section 11AC. Only w.e.f. 12.5.2000, the Section 11AC was amended and the relevant provisions were inserted in the Act giving reduced penalty. In this regard, the Hon'ble Bombay High Court in the case of CCE Raigad Vs Castrol India Ltd. 2012 (286) ELT 194 (Bom.) held that no appellate authority can reduce the penalty to 25%. The relevant portion of the above order is reproduced as under :-
"24.?The argument advanced on behalf of the assessee that the provisions of Section 11AC have to be read liberally cannot be accepted, because, Section 11AC imposes punishment to an assessee who has intended to evade duty by adopting any of the means mentioned therein. While punishing the persons who have sought to evade payment of duty, the legislature gives an incentive to pay lesser penalty provided the duty sought to be evaded with interest and 25% of the penalty is also paid within the time stipulated therein. The incentive in Section 11AC is intended to encourage payment of tax due to the revenue at the earliest without resorting to unwarranted litigation and it is not an incentive for violating the provisions of law. Therefore, the incentive in Section 11AC given to the persons who have violated the provisions of the 1944 Act cannot be treated as if an incentive given to persons who have complied with the provisions of law. Therefore, the provisions contained in Section 11AC have to be construed strictly and if the assessee fails to comply with the conditions set out in the proviso to Section 11AC, the benefit of paying lesser penalty cannot be extended to the assessee.
25.?If the contention of the assessee that even the appellate authority can direct the assessee covered under Section 11AC to pay 25% of the penalty within thirty days from the date of communication of the order passed by the appellate authority is accepted, then it would defeat the very object with which the incentive under Section 11AC is allowed. The basic object of granting incentive under Section 11AC is to encourage payment of duty sought to be evaded with interest and penalty at 25% within the time stipulated therein. When the legislature specifically fixes the time-limit within which the duty with interest and penalty at 25% is to be paid for availing the incentive, it would neither be open to the appellate authority nor any other authority to permit the assessee to pay 25% penalty at any time other than the time prescribed under Section 11AC.
26.?By comparing Section 11AB with Section 11A(2B) and (2C) and also by referring to Section 11AC as substituted with effect from 8th April, 2011, it was contended by the counsel for the assessee that it was never the intention of the legislature to levy 100% penalty under Section 11AC. We see no merit in the above contention because, firstly sub-section (2B) and (2C) to Section 11A are applicable to cases not involving fraud, collusion, suppression of facts etc, whereas Section 11AC applies to cases where there is intention to evade payment of duty on account of fraud, collusion or any wilful mis-statement or suppression of facts etc. Secondly, to attract Section 11AC criminal Intent or mens rea is a necessary constituent, whereas, under Section 11A, the criminal intent or mens rea is not the necessary constituent. Therefore, the provisions of Section 11AC cannot be interpreted with reference to the provisions contained in Section 11A of the 1944 Act. Similarly, the Section 11AC as substituted with effect from 8th April 2011 does not support the case of the assessee because, even under those provisions the penalty imposable under Section 11AC is the penalty equal to the duty determined under Section 11A(10) i.e. 100% of the duty sought to be evaded and the incentive to pay lesser penalty is also given in those provisions subject to the conditions set out therein. Thus, under Section 11AC as substituted with effect from 12th May 2000 as also substituted with effect from 8th April 2011, the penalty mandatorily imposable is 100% of the duty sought to be evaded, but if the assessee pays the duty sought to be evaded with interest and penalty at the rates specified therein within the stipulated time, then, the balance penalty would not be payable.
27.?Moreover, the third and the fourth proviso to Section 11AC make it further clear that, it is only when the duty determined as payable under Section 11A(2) is increased by the appellate authority or the Court as the case may be, then, the twenty five per cent of the increased penalty has to be paid within thirty days of the communication of the order by which such increase in the duty take effect. Thus, the appellate authority under the fourth proviso to Section 11AC is authorised to permit the assessee to pay penalty beyond the time prescribed under Section 11AC only in respect of the increased penalty required to be paid on account of the increase in the duty determined as payable under Section 11A(2) in the appellate proceedings and not in any other cases. Therefore, when the liability to pay 25% penalty under the first and the second proviso to Section 11AC is required to be paid within thirty days from the date of communication of the order the Central Excise Officer determining duty under Section 11A(2), it would not be open to the appellate authority or the Court to direct the assessee to pay 25% penalty beyond the date stipulated in the first and the second proviso to Section 11AC. For all the aforesaid reasons, we find it difficult to endorse the contrary views expressed by the Delhi High Court, P & H High Court and the Gujarat High Court in the cases referred to by the counsel for the assessee.
28.?In the present case, the applicability of Section 11AC is not in dispute. It is also not in dispute that the assessee has paid the duty sought to be evaded as also the interest payable thereon under Section 11AB before the passing of the adjudication order. Admittedly, the assessee has not paid 25% of the penalty imposed under Section 11AC within thirty days from the date of the communication of the order of Central Excise Officer determining the duty sought to be evaded under Section 11A(2) of the Act which is the mandatory requirement under Section 11AC. Instead of paying 25% of the penalty within the stipulated time, the assessee has chosen to file an appeal against imposition of penalty under Section 11AC and the Tribunal has permitted the assessee to pay 25% penalty beyond the time prescribed under the proviso to Section 11AC which is not permissible in law."
The above Hon'ble High Court's order is squarely applicable to the present case. There is no evidence to show that payment of Section 11AB interest as well as interest demanded under Rule 57U(8) of CER and reduced penalty paid before 30 days of receipt of adjudication order. Therefore, the adjudicating authority in the impugned order confirming the demand and imposing penalty under Section 11AC and demanding interest under Section 11AB and also under rule 57U of CER equivalent to the duty payable after 28.9.96 is sustainable. For the reasons discussed above, the appellants are not eligible for the reduced penalty of 25% of the duty amount.
12. As regards imposition of penalty of Rs.1 lakh under Rule 173Q of CER, considering the penalty already imposed under Section11AC w.e.f. 28.9.96 and under Rule 57 U (6), I take a lenient view.
13. In view of the above, the impugned order imposing penalty under Section 11AC and demanding interest under Section 11AB equivalent to duty payable after 28.9.1996 and imposition of penalty under Rule 57U (6) and interest under Rule 57U (8) of CER is upheld.
14. Penalty of Rs.1,00,000/- imposed under Rule 173Q is set aside.
15. The impugned order is upheld except waiver of penalty under Rule 173Q.
Appeal is disposed of in the above terms.
(Pronounced in open court on 23.2.2015) (R. PERIASAMI) TECHNICAL MEMBER gs 14