Penalty u/s 11AC not valid in absence of Suppression of fact to evade Duty: CESTAT [Read Order]

The Chennai bench of the  Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) has held that penalty under section 11AC of the Customs Act, 1962 is not valid in absence of suppression of fact to evade duty.

M/s.Tansi Pump Unit, the appellants are registered as a manufacturer of hand pumps, EB line material, Benches, Desks etc.  They availed small-scale exemption under Notification No.8/2003-CE dt. 1.3.2003 and after crossing the exemption limit were clearing the products on payment of duty.  The appellant also availed cenvat credit while paying duties on the finished product.  

It was found that the appellant had converted steel scrap into angles and channels through job workers for which purpose they removed scrap under Rule 4 (5) (a) of Cenvat Credit Rules, 2004 to the job worker.  The scrap so sent to the job worker was returned to the appellant as angles and channels.  While so returning the goods to the appellant, the job worker discharged duty liability on angles and channels.  The adjudicating authority confirmed the demand imposed along with interest and imposed an equal penalty and the Commissioner (Appeals) upheld the same. 

In the case of National Torch & Tubes (supra)it was claimed that, even if duty was to be paid at the time of removal of generated scrap, the assessee would get the consequential benefit of availing Modvat credit on the duty so paid, since there is no allegation of diversion of scrap to any other purpose. The Adjudicating authority held that the removal under Rule 57F(2) permits only the removal of inputs as such or the inputs which are partially processed. Separate Rule 57F(5) exists for the removal of the scrap, hence scrap must be removed by the job worker only on payment of duty.

The Department has vaguely alleged that the appellant has suppressed facts to evade payment of duty.  The Tribunal observed that there is no evidence to show that the appellant has done any positive act to deliberately suppress the facts to evade payment of duty. 

A Coram comprising of Mrs Sulekha Beevi C S, Member (Judicial) and Mr Vasa Seshagiri Rao,  Member (Technical) set aside the impugned order on merits as well as on the ground of limitation and allowed the appeal.

To Read the full text of the Order CLICK HERE

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