Penalty u/s 11AC(1)(c) Not Invokable in Absence of substantive evidence to Prove Deliberate Non-payment of Excise duty: CESTAT [Read Order]

In a recent case, the Hyderabad bench of Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that penalty under section 11AC(1)(c) is not invokable in the absence of substantive evidence to prove deliberate non-payment of excise duty.

M/s Singareni Collieries Company Ltd.,the appellant are in appeal against the order of the Commissioner dated 31.01.2019 (impugned order). The Adjudicating Authority decided the show cause notice issued by the Department, interalia, demanding Clean Environment Cess (Cess) of Rs. 2,35,29,71,776/- in respect of the closing stock of coal lying with them as on 30.06.2017 i.e. 5882429.44 MT. This demand was based on certain investigation wherein it was noticed that they had not paid Cess in respect of the stock lying with them as on 30.06.2017.

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The Adjudicating Authority has, interalia, examined the provisions of leviability of Cess in terms of Finance Act. 2010 and Clean Environment Cess Rules, 2010. He also examined the applicability of Notification No. 12/2017CE dated 30.06.2017 and held that the said exemption was available only to the duty of excise leviable thereon under the provisions of Central Excise Act and subject to fulfilment of two conditions which are i) the goods should have been manufactured on or before 30.06.2017 but not cleared before 01.07.2017 from the factory of production and ii) appropriate goods and service tax shall be payable on the clearance made on or after 01.07.2017 and therefore it was felt that the said notification does not exempt “Cess” on said balance of coal.

Therefore, denied the applicability of said notification in respect of closing stock as on 30.06.2017 as being not relevant for the purpose of exemption to Clean Environment Cess. One of the reasons cited for denial was that there is no notification parallel to Notification No. 12/2017-CE dated 30.06.2017 in respect of Cess liability occurred on the closing stock as on 30.06.2017 even though the appellant explained that Cess is nothing but Central Excise Duty.

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The issue involved is applicability of retrospective amendment vide section 113 of the Finance Act, 2024 (II), whereby, the Clean Environment Cess (hereinafter referred to as Cess), which was required to be paid on the closing stock of coal as on 30.06.2017, was exempted subject to meeting of certain conditions on clearance post 30.06.2017.

The Assessee has admittedly met all the conditions except to the extent of certain quantity of coal, which has been removed by them to their captive thermal power plant, which is covered in Appeal No. E/30237/2024. Admittedly, the appellants have already paid Central Excise duty and is not being disputed by Revenue. Therefore, Appeal No. E/30513/2019 does not survive because of retrospective amendment, while in Appeal No. E/30237/2024, the only issue in the facts of the case is regarding their liability of penalty and interest and status as to whether Compensation Cess was discharged on said quantities or not.

The Tribunal viewed that in view of the retrospective amendment, there is no requirement to pay Clean Environment Cess in respect of the goods which were in stock as on 30.06.2017, subject to complying with certain conditions stipulated therein.

A two member bench A.K. Jyotishi, Member (Technical) and Angad Prasad, Member (Judicial) observed that it was a bonafide belief and the fact there was no positive or substantive evidence was brought out by the Department that said non-payment was deliberate or with an intent to evade payment of duty.

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Moreover, the fact that a retrospective amendment was brought in to cover Cess under Notification No. 12/2017 also shows that it was not deliberate or intended evasion by the appellant. Thus, no penalty is imposable under Section 11AC(1)(c).

Further held that “Order-in-Original dated 03.01.2019 is set aside and remanded back to Original Adjudicating Authority, who shall verify whether the conditions for exemption of Cess in terms of amended Notification No. 12/2017, has been fulfilled or not. If fulfilled, demand would not sustain, along with interest. However, to the extent not fulfilled, demand of cess along with interest is recoverable. However, penalty under Section 11AC(1)(c) is not imposable.”

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