Hyva India Paid Differential Duty before SCN, Informed CE Department: CESTAT quashes Penalty u/s 11AC of Central Excise [Read Order]

The Mumbai Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) quashed the penalty imposed on Hyva (India) Pvt. Ltd. under Section 11AC of the Central Excise Act, 1944 citing that the appellant had voluntarily paid the differential excise duty along with applicable interest before the issuance of a show-cause notice (SCN) and had informed the Central Excise Department.

Hyva (India) Pvt. Ltd., the appellant is a manufacturer of excisable goods like hydraulic cylinders, motor vehicle bodies, and accessories classified under specific tariff headings of the Central Excise Tariff Act, 1985.

The dispute arose concerning the valuation method adopted by the appellant for clearing goods to its sister units. The calculation was based on the sale price to independent buyers, instead of applying Rule 8 of the Central Excise Valuation Rules, 2000.

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The Central Excise Department conducted an inspection on the appellant's premises on October 15, 2010, which led to the detection of discrepancies in valuation and duty payments. After the inspection, the appellant company voluntarily deposited the differential duty amounts on January 31, February 25, and February 28, 2011, and paid the corresponding interest on April 12, 2011.

Despite the voluntary payments and intimation to the department, a show-cause notice was issued proposing the confirmation of duty demands along with interest and penalties. The adjudicating authority confirmed the demand in an order and upheld penalty imposition.

On appeal, the Commissioner (Appeals) rejected their arguments and upheld the AA demand. Aggrieved, the appellant company approached the CESTAT arguing that they had already discharged the duty liability and interest before the issuance of the show-cause notice and no penalty could be levied per Section 11A(2) of the Central Excise Act, 1944.

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The two-member bench comprising S.K. Mohanty, Member (Judicial), and M.M. Parthiban, Member (Technical) examined the records and confirmed that the appellant had fully paid the assessed duty and interest before the issuance of the notice.

The tribunal explained that Section 11A(2) of the Central Excise Act, 1944 prevents the issuance of a show-cause notice for penalty when the duty and interest have already been paid before its issuance. The tribunal ruled that the penalty imposition under Section 11AC of the Central Excise Act was unwarranted and set aside the penalty demand. The assessee’s appeal was allowed.

To Read the full text of the Order CLICK HERE

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