By TIOL News Service

MUMBAI, SEPT 15, 2014: THIS is a Revenue appeal.

During the visit of the Preventive Officers it was pointed out that the assessee had cleared Galvanized Transmission Towers and parts thereof by wrongly claiming exemption under notification 6/2002-CE as amended by notification 48/2004-CE dated 10.09.2004. The officers were of the view that the exemption is available for the supply of the goods against International Competitive bidding only & to the goods which are exempt from the duties of Customs and the additional duty leviable under the Customs Tariff Act when imported into India, as per condition No.64 of the Notification and since the condition of the said Notification was not fulfilled, the appellant was not eligible for exemption.

The assessee immediately paid the duty due along with interest.

In adjudication proceedings, a penalty was imposed on the assessee.

In appeal, the Commissioner(A) held that the appellant had acted bonafide on the advice/purchase order of the customer and availed the exemption and also indicated the clearance under exemption in the ER-1 returns and since there did not exist any of the ingredients of fraud, collusion or any willful misstatement or suppression of facts etc. required to make provisions of Section 11AC ibid applicable, the penalty imposed was unwarranted and he set aside the same.

Revenue took the matter to the CESTAT.

And the Bench observed -

++ On perusal of the records, I found in para 15 of the show cause notice, the allegations against the respondent is that they have wrongly claimed the benefit of exemption by submitting the certificate issued by the Joint Secretary, which is not at all required under Central Excise Notification for availing duty exemption benefit.

++ Further in the grounds of appeal in para 2, it is again mentioned that the respondent had wrongly availed inadmissible exemption and therefore the Central Excise duty was recoverable under the proviso to Section 11A(i) of the Central Excise Act, 1944.

Commenting that the Revenue itself is saying that the respondent had wrongly availed inadmissible exemption and the fact that the respondent did not pay duty under bonafide advice/purchase order of the customer, the CESTAT held that no means rea is proved by the appellant Revenue and hence the respondent is not liable to pay penalty under section 11AC of the Act.

We reported this order as 2009-TIOL-1159-CESTAT-MUM.

Against the dismissal of the Revenue appeal, the CCE, Nashik has taken the matter to the next level. Incidentally, the penalty involved is only Rs.4,83,490/- & it seems the jurisdictional authorities are not interested in the contents of letter F.No.390/Misc./163/2010-JC dated 17th August 2011which mentions about reducing Government litigation &provides monetary limits for filing appeals by the Department before CESTAT/High Courts and Supreme court.

Be that as it may, before the High Court the Revenue submits that when the Revenue has invoked the extended period within the meaning of sub-section (4) of Section 11A of the CEA, 1944, then, a separate proof for satisfying the ingredients thereof is not necessary for imposition of the penalty and, therefore, penalty of Rs.4,83,490/- imposed on the Respondent/Assessee under Section 11AC of the CEA, 1944 could not have been set aside.

The respondent is not represented.

The High Court opined that it is unable to agree with the submission made by the Revenue and further observed -

++ After analyzing the entire material, the Commissioner (Appeals) concluded that the Assessee acted bonafide on the advice/purchase order of the customer and availed the exemption. When it was pointed out later-on that the condition No.64 of the Notification is not fulfilled and the exemption is not available to the Assessee, the Assessee paid the amount of duty leviable together with interest thereon. There was nothing on record about any ingredients, namely, fraud, collusion or any willful misstatement or suppression of facts, etc. so as to enable the Revenue to impose the penalty and therefore, the Commissioner (Appeals) has set aside the penalty.

++ We do not find that the understanding of the Commissioner (Appeals) and the Tribunal on applicability of the provision enabling imposition of penalty is in any way perverse or vitiated to such an extent as would call our interference in further appellate jurisdiction.

++ The concurrent findings are that true it is that a notice could be issued if the duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded by the reason of fraud, collusion, etc., but for the purpose of imposition of penalty, in the final analysis, these elements have to be proved. They could be said to be satisfied only on the basis of the material produced.

++ If the material produced is not pointing towards any fraud or collusion or any willful misstatement or suppression of facts or contravention of the provisions of the Act or Rules with intent to evade payment of duty, then, imposition of penalty is not called for. If the penalty cannot be imposed, then, the Revenue's exercise in doing so has been rightly interfered with.

Holding that no substantial question of law arises for consideration from such concurrent findings, the High Court held that the Appeal is devoid of any merits and so dismissed the same.

In passing : The O-in-O is dated 13.09.2007, the O-in-A is dated 12.11.2007, the CESTAT order is dated 16.6.2009, the appeal before High Court is 215 of 2013, the provisions of section 11A were re-drafted by the FA, 2011 with a view to improve the sequence in which provisions occur and simplify their language & also amended slightly by the FA, 2013.

(See 2014-TIOL-1579-HC-MUM-CX)