Suppression of Facts - whether Section AC penalty can be exempted?

PJ/Case Laws/2012-13/1052

Case: Commissioner of Central Excise V/s Chaudharana Steels P. Ltd.

Citation: 2011 (274) E.L.T. 481 (All.)

Issue:- Penalty under Section 11AC of Central Excise Act, 1944 - Whether can be exempted when there was suppression of fact & recovery was confirmed under proviso to Section 11A(1) of the Act?

Brief Facts:- Respondent-assessee are engaged in the manufacturing of M.S. Ingots, Runner & Riser, falling under Chapter Sub Heading No. 7206.90/7204.90. They had purchased scrap G.C. Sheets and availed Cenvat Credit on the same. Cenvat credit on Scrap of G.C. Sheets was inadmissible to the respondent since the sheets were intended for use in plant and buildings. The scrap of GC sheets were purchased for manufacture of steel formers, which were captively used as a part of induction furnace and further used in the manufacture of final product.

On being pointing out, respondent reversed the credit.

Show cause notice was issued to them. The Adjudicating Authority imposed penalty under Section 11AC of the Act. In appeal, the Commissioner (Appeals) observed that there is contravention of Rules which is established and penalty is warranted.

In further appeal, the Tribunal set aside the impugned order imposing penalty under Section 11AC on the ground that there is no material on records to show credit was availed with intent to evade payment of duty. Reliance was placed on High Court decision in UOI v/s TPL Industries Ltd [2007 (214) ELT 506] wherein it was held that short levy of duty deposited by the assessee before issue of show cause notice, imposition of penalty of equal amount under Section 11AC of the Act is not maintainable.

Hence, Revenue is in appeal before the High Court.

Appellant’s Contention:- Revenue submits that the Tribunal has clearly failed to take into account that the Cenvat credit was not returned voluntarily. The assessee reversed the Cenvat credit only after it was pointed out by the department. He promised to reverse the credit, but he did not do so. In the circumstances, reversal of Cenvat credit either before issuance or after issuance of notice of is immaterial.

He also relied upon the Union of India V. Rajasthan Spinning & Weaving Mills [2009 (238) E.L.T. 3 (S.C.)]

Reasoning of Judgment:- Tribunal erred in law, in recording the finding the Cenvat credit was reversed voluntarily, in order to avoid complicity. The assessee reversed the Cenvat credit only after it was pointed out by the department. The Tribunal has not taken the facts into account and misread the evidence.

Decision:- Appeal allowed.

Comment:- If it is proved that the amount is reversed after being pointed out by the department and there is intent to evade payment of duty then the penalty is imposable. But the Section 11A says that even if the duty is paid along with interest either on his own ascertainment or after being pointed out by the department then there is no need to issue show cause notice. But if there is wilful suppression, fraud etc then the penalty will be imposed. Hence, even if the duty is paid after being pointed out by the department then also show cause notice need not to be issued. The only crux is whether there is wilful suppression or fraud is there. It has to be proved by the department. But the field formation always invokes penal provision even though the duty and interest is paid by manufacturer.

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PJ/Case Laws/2012-13/1052

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