Penalty u/s 114AC not leviable in Absence of Collusion, Wilful Misstatement, Suppression of Facts or even any Duty Liability: CESTAT [Read Order]

The Kolkata Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that penalty under section 114AC of the Excise Act is not leviable in absence of collusion, wilful misstatement, suppression of facts or even any duty liability.

A tender was allowed to the appellant M/s Mohata Coal Company Pvt. Ltd for removing the goods for machining to other job workers and.(the Appellant herein) qualified for the Tender. M/s M/s Durgapur Steel Plant (DSP) obtainedthe approval from the Commissioner of Central Excise for getting the job work of machining through the appellant and had given a declaration that they would be clearing the goods without payment of duty to the job worker and had also undertaken to pay the duty on receiving the returned goods at the time of clearance from their factory. 

The Appellant, M/s Mohata Coal Company Pvt. Ltd. was undertaking the job work of receiving the goods under Annexure II Challan and returning the same to M/s DSP.  The Appellant was finding it difficult to undertake the entire job work through their infrastructure within the time frame given and intimated to the DSP that they may be allowed to take the help of approved vendors for the machining of Wheels & Axles. 

M/s Mohata Coal Company Pvt. Ltd., entered into a Hire Agreement dated 24.09.2015 with M/s Vardhaman Products (the Second Appellant) for getting the machining job done and was paying hire charges to the tune of Rs.30,000/- per month for use of machines and other charges, such as wages of labourers and maintenance of machine and tools and electricity bills. 

The Officers of the Department detained and seized the goods.The Department was of the view that sending of goods to M/s Vardhaman Products by M/s Mohata Coal Company Pvt. Ltd. without giving intimation to the Department was not proper and amounts to a violation of Rule 16B of the Central Excise Rules, 2002.  It was also alleged that M/s Vardhaman Products contravened the provisions of Rule 16B of the Rules,2002 since they were receiving the goods for job work purposes but they were not permitted by the Departmentto receive such semi-finished goods of M/s DSP.

A Coram comprising of Shri P. K. Choudhary, Judicial Member observed that there is no evidence on record to show that Wheels & Axles (Semi-finished products) sent to the hired premises was with mala fide intention or the appellant was in preparation to remove the goods subsequently. 

It was observed that Section 11AC of the Act can be invoked when the duty has not been levied or paid or short-levied or short-paid or the refund is erroneously granted by reasons of fraud, collusion or any willful misstatement or suppression of facts.

The Tribunal held that “sinceAppellant No.1, hadtransferred the semi-finished goods for machiningto Appellant No.2, without permission from the Department, it is a procedural and technical lapse on the part of the appellants and the same requires the imposition of token penalty in terms of Rule 27, which provides a maximum penalty of Rs.5,000/-. “

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