Penalty under section 11AC is not imposable when issue involves interpretation of law.

PJ/Case law/2013-14/1869

Case:- PRIJAI HEAT EXCHANGERS PVT LTD Vs CCE, MUMBAI-III

Citation: - 2013-TIOL-1269-CESTAT-MAD-CX

Brief Facts: - The brief facts of this case are that Appellant is engaged in the manufacture of excisable goods and availed Cenvat Credit in Respect of Capital goods. The same was cleared after use on 05.09.2009 and 16.02.2010 on payment of duty as per Notification No. 39/2007-CE (NT) dated 13.11.2007 by calculating the duty based on Quarter and part thereof from the date of Receipt of capital goods in the factory. The officer of the Revenue pointed out that the appellant had short paid duty on the capital goods and on pointing out the same, the appellant immediately paid the duty along with interest on 09.03.2010. Thereafter the appellant received the show cause notice dated 03.02.2012 for appropriation of duty amount already paid and for imposition of penalty under Rule 11 AC of the Central Excise Act. The adjudicating authority confirmed the duty along with interest and imposed penalty under Rule 11AC of the Central Excise Act. The appellant filed appeal and the same is dismissed by commissioner (Appeal). Hence, the appellant is before the Tribunal.
Appellant contentions: - The contention of the appellant is that the issue is in respect of interpretation of provision of Notification 39/2007 CE (NT).The appellants calculated and paid the duty by taking into consideration the quarter in which the capital goods were received and cleared from the factory whereas the Revenue is calculating duty on the basis of the days from the day thecapital goods were received in the factory. In these circumstances, there is no intention on the part of the appellants to evade payment of duty.

Respondent contentions: - The Revenue relied upon the findings of the lower authority and submitted that as the appellants had short paid the duty at the time of clearance of the capital goods, therefore, differential duty has been paid subsequently in view of the objection raised by the Revenue, therefore, it is clear case where the appellants evaded payment of duty hence the penalty is rightly imposed.

Reasoning of Judgment: -It was found that the provisions of Notification no. 39/2007-CE (NT) provide that if the capital goods on which credit has been taken are removed after being used, the manufacturer shall pay an amount equal to CENVAT credit taken on the capital goods reduced by 2.5% on each quarter of the year or part thereof from the date of taking of the CENVAT credit. The appellants while clearing the capital goods calculated duty on quarterly basis whereas the Revenue wants to calculate on actual number of days. In these circumstances, Tribunal finds merit in the contention of the appellants that it is not a case of intention to evade payment of duty, therefore, the penalty imposed under section 11AC of the Central Excise Act is set aside and the appeal is allowed.

Decision:-Appeal Allowed.

Comment:-The analogy drawn from this case is that whenever the matter requires interpretation of law, it cannot be said that the assessee has willfully evaded payment of duty and so the penalty under section 11AC is not imposable.

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PJ/Case law/2013-14/1869

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