Commissioner of Central Excise vs Shree Khodiyar Rolling Mills

K.A. Puj, J.—The Commissioner of Central Excise, Bhavnagar has filed this tax Appeal u/s 35G of the Central Excise Act, 1944 proposing to formulate the following substantial question of law for the determination and consideration of this Court:

Whether CESTAT was correct in holding that the decision of the Commissioner (Appeals) to impose penalty equivalent to the amount of duty confined u/s 11AC of the Act is not warranted and accordingly allowing the appeal of the Respondent?

Heard Mr. Y.N. Ravani, learned Standing Counsel appearing for the Revenue and perused the orders passed by the authorities below.

The Assistant Commissioner of the Central Excise, after issuance of the show-cause notice passed an order on 31-10-2007 confirming the demand of Rs. 62,373/- under Rule 14 of the CENVAT Credit Rules, 2004 read with Section 11A of the Central Excise Act, 1944. He also directed that the Respondent-Assessee to pay interest at the appropriate rate on the amount reversed from the date of detection of the case to the date of payment i.e. 25-12-2004 to 31-12-2004 u/s 11AB of the Central Excise Act, 1944. He further imposed the penalty of Rs. 10,000/- on the Respondent-Assessee u/s 25(1)(b) of the Central Excise Rules, 2002 and also imposed penalty of Rs. 10,000/- under Rule 15(1) of the CENVAT Credit Rules, 2004. While passing the said order, he has specifically held that since there is no case of clandestine removal of finished goods on records and also no suppression of facts and circumstances to evade payment of duty of excise are noticed, he did not find any short levy or short payment of duty of excise and hence, penal action against the Respondent-Assessee u/s 11AC of the Act was not attracted.

The Revenue, being aggrieved by the said order, preferred Appeal before the Commissioner (Appeals) who has observed in his order dated 27-5-2008, on the basis of the statement of Mr. Hitesh Chimanlal Shah, Manager and Authorized Signatory of the Respondent-Assessee recorded during the investigation that it was clear that the Respondent was aware of the shortage of goods and yet, they continued to avail CENVAT Credit on the goods not actually received and also the Respondent was not reversing the proportionate CENVAT Credit on their own volition and paying/reversing the same only on being caught by the department. He has further observed that the mala fide intention of the Respondent was, therefore, established and the facts of the case satisfied the ingredient for imposition of penalty u/s 11AC of the Act. He, therefore, modified the order in original to the extent of imposing the penalty equal to the amount of duty confirmed.

This order was challenged by the Respondent-Assessee before the Tribunal and the Tribunal vide its order dated 2-6-2009 [2009 (247) E.L.T. 287 (Tribunal)] upheld the order of Assistant Commissioner holding therein that there was no admission of clandestine removal which is a serious charge in the present case also. The Tribunal, therefore, held that the decision of the Commissioner (Appeals) to impose penalty u/s 11AC is not warranted under the circumstances and accordingly set aside the order of the Commissioner (Appeals).

We have considered the submissions made by Mr. Ravani and also perused the orders of the authorities below. We are of the view that the learned Assistant Commissioner has clearly recorded the finding that there is no clandestine removal nor there is short levy of duty and hence, he has not invoked the penal provisions u/s 11AC of the Act. Even otherwise, when Section 11AC is not applicable, there is no question of levying any penalty under that Section. The Commissioner has simply relied on the statement of Mr. Hitesh C. Shah. However, on the basis of the said statement, it cannot be said that there was an intention to evade the payment of duty. We are, therefore, of the view that the Tribunal has rightly set aside the order passed by the Commissioner (Appeals).

Even the original Adjudicating Authority as well as the final fact finding authority have come to the conclusion that when ingredients of Section 11AC are not satisfied, there is no question of levying any penalty under that Section.

In view of the above, we see no justification in interfering in the order passed by the Tribunal. We are of the view that no question of law, much less any substantial question of law, arises out of the order of the Tribunal and hence, we dismiss this appeal.