Case Law Details
Micky Metals Limited Vs Commissioner of CGST & Excise (CESTAT Kolkata)
In the show cause notice dated 10-06-2016, except for stating that the assessee has contravened the provisions of the Rules, there is no specific allegation so as to hold the assessee guilty of having committed fraud, collusion or suppression of facts or made any wilful misstatement with an intent to evade payment of duty. The authority is bound to record a prima facie finding that there was an intent to evade payment of duty by suppressing the material facts or by making wilful misstatement or by committing fraud or collusion. Thus, in the absence of any such specific allegation in the show cause notice, the authority cannot mechanically impose penalty under Section 11AC of the Act. The provisions of Section 11AC of the Act are attracted in the event of establishing fraud, collusion or suppression of facts or made any wilful misstatement with an intent to evade payment of duty. This has not been done in the present case.
In view of the above, the penalty is set aside.
FULL TEXT OF THE CESTAT KOLKATA ORDER
The Ld. Advocate appearing on behalf of the appellants, submits that subsequent to audit observation, it was noticed that the Appellant had stock transferred their finished goods to depot at Gaziabad Branch after paying Central Excise duty at factory gate and subsequently sold the same from the depot at Gaziabad Branch. Audit observed that the assessee had adopted the valuation in respect of their finished goods cleared to depot at Gaziabad Branch on the basis of transaction value under Section 4 (1)(a) of the Central Excise Act, 1944 instead of Rule 7 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 as amended.
2. The Appellant immediately accepted their default and paid the entire amount of Central Excise duty to the tune of Rs.4,80,276/- on 26.03.2015 along with interest of Rs.1,10,263/-. Subsequently, Show-cause notice dated 10.06.2016 was issued to the Appellant, which was adjudicated by Order-in-Original dated 22nd December, 2017.
3. The Appellant filed appeal before the Ld. Commissioner (Appeals) for setting aside the equal amount of penalty imposed under the provisions of Rule 25(1)(d) of the Central Excise Rules, 2002 read with Section 11AC of the Central Excise Act, 1944. However, the Ld. Commissioner (Appeals) rejected the appeal before him and upheld the penalty.
4. Thereafter, the Appellant filed the present appeal before the Tribunal on 16.07.2019. Subsequently, they filed an application under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 for final settlement of disputes and they were issued SVLDRS 1 & SVLDRS 2 Certificates. Subsequently, the Department had intimated the applicant vide C.No.V(30)795/CGST/SVLDRS/Tech/Gr.7/Bol/2020/791 dated 26.05.2020 as follows :
“ ……………………………………..
Since you have filed appeal before CESTAT on 16.07.2019
i.e. after 30.06.2019 and your appeal is still pending litigation and you have also not furnished undertaking to the department in terms of para 2(viii) of Circular No.1072/05/2019-CX dated 25.09.2019, you have not fulfilled the conditions, as mentioned above, hence you are ineligible under the Scheme.
Therefore, the SVLDRS 1 application filed under ARN No.LD3112190005788 dated 31.12.2019, being ineligible, is hereby rejected.”
In spite of enough follow-up, the Appellant assessee was not issued Form No.SVLDRS-4, which is discharge Certificate for full and final settlement of Tax Dues under Section 127 of the Finance (No.2) Act, 1994 read with Rule 9 of Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019.
5.1 After giving careful consideration to the submissions, I am of the view that in the peculiar facts and circumstances of this case, the plea for vacating the penalty is tenable. The substantive dispute between the Department and the Assessee revolved around the question whether valuation adopted by the assesse on the basis of transaction value under Section 4(1)(a) of the Central Excise Act, 1944 or should have followed the provisions of Rule 7 of the Central Excise Valuation (Determination of price of Excisable Goods) Rules, 2000. The penalty provision stands attracted where duty of excise has not been levied or paid or has been short-levied or short-paid by the reason of fraud, collusion or any willful mis-statement or suppression of facts or contravention of any of the provisions of the Act or the Rules made thereunder with intent to evade payment of duty. Thus, the prerequisite being there should be material to establish either fraud, collusion or willful mis-statement or suppression of facts or contraventions of the provisions of the Act or the Rules and all these have been committed with an intent to evade payment of duty..
5.2 I have perused the show cause notice, the Order-in-Original, the order passed by the appellate authority. In the show cause notice dated 10-06-2016, except for stating that the assessee has contravened the provisions of the Rules, there is no specific allegation so as to hold the assessee guilty of having committed fraud, collusion or suppression of facts or made any wilful misstatement with an intent to evade payment of duty. The authority is bound to record a prima facie finding that there was an intent to evade payment of duty by suppressing the material facts or by making wilful misstatement or by committing fraud or collusion. Thus, in the absence of any such specific allegation in the show cause notice, the authority cannot mechanically impose penalty under Section 11AC of the Act. The provisions of Section 11AC of the Act are attracted in the event of establishing fraud, collusion or suppression of facts or made any wilful misstatement with an intent to evade payment of duty. This has not been done in the present case. Moreover, the duty itself has been remitted on 26.03.2015 even prior to issuance of show-cause notice. However, I find that the Tribunal has all along taken a consistent view that when the entire demand along with applicable interest has been paid by the Appellant before issuance of show-cause notice, there was no occasion to issue any show-cause notice. I also find support from the following decisions of the Hon’ble High Courts on this issue :
(i) CCE, Bangalore II Vs. Pushpadeep Enterprises : 2012 (279) ELT 503 (Kar.) ;
(ii) Akanksha Steels Pvt. Ltd. Vs. CCE : 2018 (12) GSTL 281 (All.) ;
(iii) CCE & Cus, Aurangabad Vs. Atra Pharmaceuticals Ltd. : 2016 (342) ELT 39 (Bom.) ;
(iv) Sita Lakshmi Mills Ltd. Vs. CESTAT, Chennai : 2018 (361) ELT 647 (Mad.) ;
(v) CCE, Chennai III Vs. Supreme Industries Ltd. : 2014 (303) ELT 513 (Mad.).
6. In view of the above decisions, the penalty is set aside and the appeal filed by the appellant is allowed with consequential relief, if any.
(Pronounced in the open Court on 26.08.2022)
