Commissioner of C. Ex. vs Liners India Ltd.

V.V.S. Rao, J.—This appeal u/s 35G of the Central Excise Act, 1944 (the Act), is preferred by the Revenue against the order of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), South Zonal Branch at Bangalore, in Service Tax Appeal No. 422 of 2008, dated 18-12-2009 2010 (256) ELT 122 ].

The Respondent company is a manufacturer of "cylinder liners" falling under Chapter Sub-Heading No. 84.09 of the Central Excise Tariff Act, 1985. They have their trading division at Vijayawada for distributing their products. During the period from 1-8-1996 to 18-11-1998 the Respondent removed the final product from their factory to the trading division on payment of central excise duty by raising invoices, but they did not pay any sales tax while clearing the goods from their manufacturing unit, to the trading division, on stock transfer basis. They also did not inform the Central Excise Department, nor did they opt for provisional assessment under Rule 9B of the Central Excise Rules, 1944. The Anti-Evasion Unit of the Central Excise Head Quarters Office Guntur, pointed out the short payment of duty of Rs. 96,765/-. The Respondent immediately paid the differential duty for the period from 1-8-1996 to 18-11-1998. Thereafter, proceedings for imposing penalty and interest under Sections 11AB and 11AC of the Act were initiated. The Assistant Commissioner, Central Excise, Vijayawada Division, issued a show cause notice on 13-3-2003 and, having regard to the fact that the payment was voluntarily made, further proceedings were dropped. The Department then appealed to the Commissioner of Central Excise and Customs (Appeals), which was dismissed vide order dated 22-5-2008. The appeal to CESTAT was also dismissed by the impugned order.''

Standing Counsel for Central Excise and Customs submits that, when there is short payment of duty of excisable goods, the Assessee is liable to pay the penalty and interest and, therefore, CESTAT was in error. He also contends that even if the goods are removed to their trading division, as per Section 4(1)(a) of the Act, the price at which goods are ordinarily sold by the Assessee to the buyers will be the price for determining duty and, when it was found that the Assessee had paid the duty on the value of the goods at the time of removal from the factory, the demand was raised. According to him, there is misrepresentation on the part of the Assessee.

Section 11AC of the Act excluding the provisos reads as under

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-levied or short-paid or erroneously refunded by reasons of fraud, collusion or any willful 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.

A plain reading of the above would show that willful misstatement or suppression of facts with an intention to evade payment of duty is the sine qua non for contracting the penalty provision. It is not the case of the Department that the Respondent committed fraud or there was collusion. Their case is that there is misstatement and suppression of facts. If that be so, the factum of intention to evade payment must be clearly proved. It is admitted by the Department that the show cause notice was issued by the Assistant Commissioner on 13-3-2003, which was confirmed on 30-11-2007. Even before the demand made in the show cause notice was confirmed, by 11-2-2003 the Respondent had paid the duty of Rs. 96,765/-. Therefore, Section 11AC of the Act is not attracted. Same reasoning would also hold good in so far as the applicability of Section 11AB is concerned. Learned Tribunal has correctly appreciated the factual background and applied the law. We do not find any substantial question of law in this appeal.

The appeal is therefore dismissed.