The Chennai bench of the Customs, Excise And Service Tax Appellate Tribunal (CESTAT) has recently set-aside the penalty order passed upon the excise duty paid much before the issuance of show cause notice.
Appellant Chennai Petroleum Corporation Ltd.is a Public Sector Undertaking engaged in the manufacture of petroleum products such as Naphtha, High Speed Oil and LPG falling. Based on intelligence that appellants were not discharging the appropriate duty on the quantity of petroleum products cleared through pipelines from their refinery, the officers of Director General of Central Excise Intelligence (DGCEI) visited their refinery and collected details.
DGCEI knew that appellant had not paid excise duty based on the quantity removed from their refinery, but they had accounted, prepared invoice and paid excise duty based on the quantity of petroleum products received into the leased tanks at Muttam terminal which is located outside the refinery.
Further, the DGCEI noticed that appellant had not paid duty on the stock of Naptha of 1048 Kilo Litres at NAT, which was lying in the pipeline after being cleared from the refinery.
On being pointed out these lapses,appellant paid total payment of Rupees 53,11,488/-
After the payment Show cause notice (SCN) was issued for demanding the short duty along with interest for the disputed period from 01.04.2006 to 31.01.2011.
The original authority confirmed the demand of Rs.2,33,00,356/- as proposed in the show cause notice along with interest and imposed equal penalty under Section 11AC of the Central Excise Act, 1944.
Aggrieved appellant filed an appeal before the tribunal.
Raghavan Ramabadran counsel for the appellant submitted that though the period involved in the present case is prior to 31.01.2011 and the clarification issued as per Controller and Auditor General Report No.17 of 2013 is dated 14.02.2014 the said clarification has to be applied for quantification of liability of excise duty for the period of dispute.
Therefore there is no conscious short payment of duty on the side of the appellant.
Moreover the appellant is a Public Sector Undertaking and could not be saddled with a penalty alleging that there is intention to evade payment of duty. The department has not adduced evidence of any positive act of suppression of facts on the part of the appellant. All the figures that form the basis for the quantification of duty have been taken by the department from the documents that have been submitted by the appellant.
Ms. K. Komathi counsel appeared for the revenue submitted that quantity that was despatched from the refinery was not accounted in the RG.1 register and in the ER1 returns.The appellants have short paid duty on the quantity of petroleum products that have been cleared from the refinery.
Only on being pointed out by DGCEI, they have paid the duty liability on 04.09.2008 before issuance of SCN.
Moreover the appellants have not accounted for the correct quantity in their RG.1 Register, it is suppression of facts.
Thus it was observed that regard to demand of duty on the pipeline quantity of Naphtha appellant has paid duty much before issuance of the show cause notice and therefore the department ought not to have imposed penalty.
Sulekha Beevi C.S, Member (Judicial) and M. Ajit Kumar, Member (Technical) concluded that penalties imposed on account of duty paid at the earliest is unwarranted and set-aside.
Thereafter, the matter is remanded to the original authority who is directed to re-quantify the duty demand on the basis of the clarification issued by the Department dated 14.02.2014.
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