In a recent judgement, the Ahmedabad bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that mere omission to inform the Excise department about the registration of a product under the insecticide act cannot be a wilful misstatement of fact and penalty under section 11AC of the Central Excise Act, 1944.
Agro Pack, the appellant is engaged in the manufacture of ‘MIRACULAN’ falling under chapter subheading no. 38083040 of CET, 1985 and applying the provision of section 4A of Central Excise Act, 1944 for valuation purposes by taking abatement of 35% on MRP value as per notification no. 02/2006-CE (N.T.) dated 01.03.2006.
It was alleged in the show cause notice that the appellant failed to bring to the notice of the department the fact that Triacontanol is an insecticide under the provisions of the Insecticides Act, 1968, which is a material fact to decide the classification of the said product and they also failed to submit to the department copies of the certificate of registration obtained under the Insecticides Act.
It was evident that the composition of the product was known to the department right from 1989 onwards. The product Triacontanol, which is the active ingredient was brought under the Insecticide Act, 1968 vide gazette notification dated 3-1-1996. Thereafter, the appellants took registration under the said Act and started complying with the procedures specified thereunder.
Merely because they did not inform the department of their product registration under the Insecticides Act, of 1968, it cannot be held that they have suppressed the facts with an intent to evade payment of duty. So long as the constitution of the product was known to the department and the notification of Triacontanol under the purview of the Insecticides Act was made under a Gazette notification, which is a public document, it was the responsibility of the department to take note of the changes in the law and reclassify the product accordingly.
A two-member Coram comprising Mr Ramesh Nair, Member (Judicial) and Mr C L Mahar, Member (Technical) observed that mere omission to inform the department of the registration of the product under the Insecticides Act, 1968 cannot be held as suppression or willful misstatement of facts with an intent to evade duty. The department has not adduced any evidence to prove the charge of suppression on the part of the appellant.
It was held by the Tribunal that once there is no suppression, there cannot be any imposition of penalty under Section 11AC of the Central Excise Act. While allowing the appeal, the Court set aside the impugned order.
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