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2009 (8) TMI 1057

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..... dingly, Section 11AC and Section 11AB of the Act would have no application to the facts of the present case. Appeal dismissed. - C.E.A. No. 24 of 2008 and C.E.A. No. 122 of 2005 - Dated:- 12-8-2009 - M.M. Kumar and Jaswant Singh, JJ. Shri Sanjeev Kaushik, Sr. Standing Counsel, for Indirect Taxes, for the Appellant. Shri M.P. Devnath, Advocate, for the Respondent. JUDGMENT This order shall dispose of C.E.A. No. 24 of 2008 and C.E.A No. 122 of 2005 because common question of law and facts are involved. These appeals have been filed by the Revenue, under Section 35G of the Central Excise Act, 1944 (for brevity the Act ). In C.E.A. No. 24 of 2008, the order dated 21-5-2007 [2007 (217) E.L.T. 233 (Tri.-Del.).] (P-3) passed by the Customs, Excise and Service Tax Appellate Tribunal, New Delhi, is the subject matter of challenge. The Revenue has claimed that the following substantial question of law would arise for determination of this Court : Whether mandatory penalty under Section 11AC can be imposed on the assessee and interest under Section 11AB can be levied in the case where duty has been paid after detection of the shortage by the department but before issuance of show cause notice .....

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..... It is significant to notice in the process of stock checking and verification, the officers of the department were also joined. On finding of discrepancy the dealer had paid an amount of Rs. 5,78,737/- in October, 2000 and Rs. 10,74,274/- on 5-6-2001. In that regard intimation to the departmental authority was also sent. It is thus claimed that there was no suppression, misstatement or fraud with an intention to evade payment of duty as contemplated by Sections 11AC and 11AB. The dealer had contended on the basis of various judgments to the effect that if the duty has been paid before issuance of the show cause notice then no interest or penalty, as contemplated under Section 11AB and Section 11AC, would be attracted. The Appellate Authority, however, did not feel persuaded by the submissions made by the dealer and rejected the claim made in the appeal and upheld the imposition of interest and penalty imposed by the Assessing Authority under Sections 11AB and 11AC (P-2). 4. The dealer went in appeal to the Tribunal and argued that there was no suppression or misstatement of facts with an intention to evade the payment of duty as contemplated under Section 11AC. It was submitted th .....

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..... ble and is set aside. The appeal is allowed as indicated above. 5. The aforesaid order of the Tribunal was challenged before this Court in a writ petition. This Court has already preferred the view that merely because duty stood paid before issuance of show cause notice would not constitute a basis to conclude that no penalty or interest was imposable. Accordingly, the order of Tribunal was set aside with the following observation : In view of judgment rendered, today, in C.E.A. No. 13 of 2005 (Commissioner of Central Excise, Delhi-III v. M/s. Machino Montell (I) Ltd. And another), we allow this appeal and set aside the order passed by the Tribunal to the extent the penalty and interest levied on the assessee had been set-aside because the duty was deposited before issue of show cause notice and remand the case back to the Tribunal for fresh decision on merits and in accordance with law. 6. On the basis of aforesaid remand order, the Tribunal proceeded to decide the matter afresh and allowed the appeal once again. The Tribunal placed reliance on its own judgment rendered in the dealer s own case namely Maruti Udyog Ltd. v. CCE, Delhi 2004 (173) E.L.T. 382. In the aforesaid order of .....

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..... ortages are within the tolerance limits fixed by an efficient Management and certified to as within the norms by qualified accounting professionals, it would be unreasonable and unfair for Tax authorities to take a different view. In these circumstances, we are of the view that there is no evidence to sustain a finding that this is a case of irregular or incorrect taking or utilization of credit. In such a situation, no demand can be raised under Rule 57-I. The demand is accordingly, set aside and appeal is allowed with consequential relief to the appellant. Amounts already deposited by the appellant, on account of this dispute, shall be returned to it. 7. On the basis of aforesaid view taken by the Tribunal in its earlier order, the Tribunal proceeded to determine the question Whether the non-return of the credit relatable to inputs found short during the relevant years, was the result of fraud, suppression of facts etc. as contemplated by Section 11AC and Section 11AB? The Tribunal reiterated its earlier view taken in the year 2004 in case of the dealer itself and concluded that once the findings are that certain shortages and excesses are normal in such a huge business concern, .....

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..... ;payment or short payment of duty regardless of the conditions expressly mentioned in that provision for its application. 11. Having heard learned counsel at some length, we are of the view that the controversy raised in the instant appeals stand resolved by the judgment of Hon ble Supreme Court in Rajasthan Spinning and Weaving Mills case (supra). In short the judgment says that the penalty under Section 11AC and interest under Section 11AB of the Act is punishment for an act of deception by the assessee with an intent to evade duty by adopting any of the means mentioned in that provision. It would, therefore, be necessary to read Section 11AC which is as follows : 11AC. Penalty for short-levy or non-levy of duty in certain cases. - Where any duty of excise has not been levied or paid or has been short levied or short-paid or erroneously refunded by reasons of fraud, collusion or any willful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, the person who is liable to pay duty as determined under sub-section (2) of section 11A, shall also be liable to pay a penalty equa .....

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..... tion by the assessee with the intent to evade duty by adopting any of the means mentioned in the Section. 13. A perusal of the aforesaid paras from the Hon ble Supreme Court makes it clear that if the notice under Section 11A(1) alleges that escaped duty was the result of any conscious and deliberate wrong doing and in the order passed under Section 11A(2), there is legally tenable finding to that effect then alone the provisions of Section 11AC would be attracted and not otherwise. 14. Hon ble the Supreme Court then in para 20 proceeded to analyse the judgment in Dharamendra Textiles case (supra). It noticed that the Revenue has been relying upon the aforesaid judgment as if in every case of non-payment or short payment of duty, the penalty envisaged by Section 11AC would automatically get attracted and that the authority had no discretion in the matter. It was observed that there was no reason to understand or read the judgment in Dharamendra Textiles case in that manner. After referring to various paras of the judgment in Dharamendra Textiles case, their Lordships observed in para 21 of the latter judgment that they could not see as to how the decision in Dharamendra Textiles ca .....

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