Commissioner of C. Ex. vs U.T. Limited

This appeal has been preferred by the Revenue proposing following substantial question of law :

When the department has relied upon the statutory records of the assessee showing similar goods sold at different prices and cleared by the assessee to its sister unit and other buyers, could CESTAT, on an appeal by the department for imposition of penalty on the assessee justified in holding that department has not adduced any material evidence and the goods supplied were semi-furnished?

The assessee is manufacturing Hydraulic Pump Assembly and parts thereof, Hydraulic Valve and parts thereof, Hydraulic lift and parts thereof and High Pressure Jet Cleaning Machine and parts thereof falling under Chapter Heading Nos. 84.13, 84.81, 87.08 and 84.24 respectively of the Schedule to the Central Excise Tariff Act, 1985. During test check of records/invoices, it was observed that the assessee was resorting to undervaluation of goods cleared to M/s. U.T. Limited, Hosur, by charging lower rates as compared to other buyers. The adjudicating authority raised a demand of Rs. 3,98,784/- and imposed penalty of Rs. 50,000/-. The Commissioner (Appeals) upheld the demand but set aside the penalty and the said view has been affirmed by the Tribunal. The Tribunal held that difference in price between supplies made to the market and clearances made to the assessee''s own unit was for the reason that the goods cleared to its own unit were semi-finished and even when demand was upheld, there could be two views on alleged undervaluation and, therefore, penalty was not justified.

Only contention raised in support of the appeal is that the goods were identical and that stand of the assessee was false.

We are unable to accept this submission. Mere rejection of the stand of the assessee was no ground for holding that the stand of the assessee was false for purposes of imposition of penalty. Reference may be made to judgment of the Hon''ble Supreme Court in Hindustan Steel Ltd. Vs. State of Orissa, , wherein, it was held that element of mens rea is normally required to be shown for imposition of penalty. Same view was taken in Commissioner of Income Tax, West Bengal I, and Another Vs. Anwar Ali, . In the present case, penalty has been imposed u/s 173 of the Central Excise Act.

A bare language of the provision shows that the element of mens rea is not excluded for imposing penalty under the above provision.

In the present case, finding recorded by the Tribunal that there was no mens rea on the part of the assessee in not shown, in any manner, to be unreasonable or perverse.

Accordingly, we hold that the view taken by the Tribunal while upholding setting aside of the penalty on the ground that there was no mens rea on the part of the assessee does not call for any interference.

The appeal is dismissed.