CX - Penalty u/s 11AC would follow, as night follows day, only if, finding is returned that there was an escapement of duty due to conscious and deliberate wrongdoing on part of the Assessee: HC
By TIOL News Service
CHENNAI, JUNE 28, 2017: BOTH, Revenue as well as the Assessee, have preferred an appeal against order of the Tribunal dated 28.01.2005.
The facts are that waste and scrap emerged during the manufacture of the final product i.e. LAB and which were cleared by the assessee without payment of any duty.
A SCDN dated 18.02.1999 of Rs.12,68,377/- for the period 01.01.1994 and 31.08.1998 was issued to the assessee for the recovery of CE duty allegedly not paid.
Noticing that the SCDN covered a period in excess of five years, the CCE while upholding the demand, reduced the demand from Rs.12,68,377/- to Rs.12,03,578/-. Penalty u/s 11AC of Rs.7,41,499/- for the period from 28.09.1996 (when s.11AC came into force) was also imposed.
The Tribunal while upholding the duty demand as confirmed by the AA reduced the penalty to Rs.1.00 lakh. Negating the contention of the assessee that the demand is hit by limitation, the Tribunal held that the subject goods, as alleged in the SCN, had been cleared without payment of duty and without disclosure of their production and clearance either by way of declarations or in the RT-12 returns.
As mentioned, both, Revenue and the assessee, are before the High Court.
Revenue, aggrieved by the fact that penalty was brought down to Rs.1 lakh and the appellant, contending that the larger period of demand cannot be invoked, normal period being six months.
The assessee submitted that the law for most part of the period in issue was in a state of flux with regard to the exigibility of the waste/scrap to tax. And, therefore, the Assessee was well within its right to hold bonafide belief that waste and scrap, adverted to in the SCN, were not excisable goods, and, therefore, were not amenable to duty. It is also submitted that there was no intention on their part to evade payment of duty by suppressing facts as they had been raising debit notes as a clearance document at the time of sale of waste and scrap.
Cases relied upon were –
+ DCW Ltd. 1996 (81) ELT 381 (Tri.) .
+ Spic Pharmaceuticals Division - 2006-TIOL-1741-CESTAT-MAD ,
+ Deepak Fertilizers and Petro Corporation Ltd. - 2004-TIOL-889-CESTAT-MUM
+ Alkyl Amines Chemicals Limited - 2008-TIOL-18 89 -CESTAT- MUM
+ Padmini Products - 2002-TIOL-289-SC-CX
The counsel for the Revenue contended that the extended period of limitation could be invoked in the present case as the Assessee had failed to make requisite declarations and disclosures in the returns; that the finding of suppression returned by the Commissioner, which was affirmed by the Tribunal, is in order and need not, therefore, be disturbed by the Court.
After considering the submissions made by both sides, the High Court observed -
+ The defining principle for invoking the extended period of limitation is, that there should be an "intention to evade payment of duty" by the noticee or his agent. The fact is that, insofar as the subject waste and scrap is concerned, there was, for a long period of time, clearly an uncertainty, as to whether or not they were excisable goods and hence, amenable to duty as claimed by the Revenue.
+ While in the impugned judgment and order, the Tribunal has taken the view against the Assessee, a reference to the facts narrated above, in particular the various orders of the Tribunal, would show that the law on the subject was, in fact, in a state of flux.
+ Therefore, in our view, it could not have been concluded by the Authorities below that the mere failure to make declarations and disclosures in the returns, in the given facts and circumstances, would amount to an "intention to evade payment of excise duty".
Adverting to the apex Court decisions in Padmini Products (supra) , Chemphar Drugs and Liniments - 2002-TIOL-266-SC-CX, Royal Enterprises, Pushpam Pharmaceuticals Company - 2002-TIOL-235-SC-CX, the High Court further observed -
++ Debit notes had been raised by the Assessee qua sale of waste/scrap.
++ Mere failure to make declarations/or disclosure of the clearance of waste and scrap in the returns would not amount to suppression in the given facts and circumstances.
++ SCN, being beyond limitation, is not sustainable in law.
The judgment of the Division Bench passed in the matter of CEE V. NEPC India Limited (Mad) was held distinguishable on facts, as in that case, the Assessee had cleared waste and scrap without raising any bills.
As for the appeal filed by the Revenue for enhancement in the penalty since reduced by the Tribunal, the High Court noted -
+ Payment of penalty under Section 11AC of the CE Act would follow, only if, the finding of fact is returned that there was an escapement of duty, due to a conscious and deliberate wrong doing on the part of the Assessee.Thus, in other words, the penalty under Section 11AC would follow, as night follows day, only if, such a finding is returned. In other words, it will be mandatory to levy penalty only, if, such a finding is reached in the matter. In the instant case, one has not been able to arrive at such a conclusion.
The impugned order of the Tribunal was set aside.
Revenue appeal was dismissed and that filed by the assessee stood allowed.
(See 2017-TIOL-1209-HC-MAD-CX)
