Rayalaseema Concrete Sleepers (Pvt.) Ltd. vs Commissioner

This is a tax appeal under Section 35(G) of the Central Excise Act, 1944 (the Act) against the order dated 24-8-2012 [2012 (285) E.L.T. 544 (Tribunal)] passed by the Customs, Excise and Service Tax Appellate Tribunal, New Delhi (the Tribunal) partly dismissing the appeal of M/s. Rayalaseema Concrete Sleepers (Private) Limited (the Assessee) and upholding the penalty under Section 11AC of the Act for short paying the excise duty for the period 26-6-1995 to 31-8-1998. The Facts. The Assessee manufactures concrete sleepers for the Railways. It supplied concrete sleepers to the Railways and paid the duty on the bills raised by it. Under the agreement, there was a clause for the price escalation of the goods mentioned in the bills.

The Assessee raised bills for escalated price escalation for the concrete sleepers supplied during the relevant period. It also received the escalated price for the concrete sleepers in the year 1999. However, the Assessee neither paid the excise duty at the time of raising the escalated bills nor when the escalated price received by it.

The Directorate General of Anti-Evasion (DGAE) pointed out the short payment of the excise duty, namely, the duty payable on the escalated bills of the goods amounting to Rs. 13,26,410/-.

The Assessee paid a part of the duty, namely, Rs. 6,04,252/- but did not pay the remaining part of the duty.

The Adjudicating Officer (the AO) issued a show cause notice dated 23-3-2000 to the Assessee to show cause as to why the excise duty of Rs. 13,26,410/- be not imposed upon it and the duty of Rs. 6,04,252/- already paid be appropriated as well as the penalty be imposed under Rule 173Q of the Central Excise Rules, 1944 (the Rules) and under Section 11AC of the Act.

The Assessee showed cause. However, the AO by his order dated 27-9-2001 confirmed the notice and imposed penalty of the amount equal to duty and Rs. 50,000/- under Section 11AC of the Act and Rule 173Q of the Rules, respectively.

Aggrieved by the aforesaid order, the Assessee filed an appeal before the Tribunal. It was partly allowed by setting aside the penalty under Rule 173Q and reducing the penalty under Section 11AC of the Act to Rs. 2,00,000/-.

The Central Excise Department (the Department) filed an application to refer the substantial question of law for consideration of the High Court. It was allowed and thereafter the reference was registered as CER No. 3/2003.

The reference was answered by this Court on 11-4-2012 and the case was sent back to the Tribunal for decision in accordance with decision in the case of Union of India v. Rajasthan Spinning and Weaving Mills; and Union of India (UOI) Vs. Rajasthan Spinning and Weaving Mills, .

The Tribunal thereafter dismissed the appeal of the Assessee so far as imposition of penalty of equal amount of duty namely Rs. 13,26,410/- under Section 11AC of the Act was concerned. Hence, the present appeal by the Assessee.

Questions Involved

We have heard counsel for the parties. This appeal was admitted on 21-2-2013 on the substantial questions of law (a) and (b) mentioned in the memorandum of appeal. They are as follows :

"(i) Whether the mandatory penalty of Rs. 13,26,410/- equal to the amount of duty short paid can be imposed on the appellant u/s. 11AC of the Central Excise Act, 1944, whereas the appellant has already paid the excise duty amounting to Rs. 6,04,252/- voluntarily on 16-11-1999 in light of demand of duty Rs. 13,26,410/- prior to passing the original order dated 27-9-2001 by the adjudicating authority.

(ii) Whether under Section 11AC of the Central Excise Act, 1944, penalty for short levy or non-levy of duty in certain cases can be imposed with retrospective effect in the instant case of appellant where the demand of duty is made from period 26-6-1995 to 31-8-1998 and the provision of Section 11AC of the Central Excise Act is substituted w.e.f. 28-9-1996 by Section 76 of the Finance (2) Act 1996 (33 of 1996).

THE DECISION

The AO has recorded a finding that:

"� The Assessee did not inform about the clause regarding escalation of the price; the bills claiming the escalated price; and the escalated price received by the Assessee;

� The Assessee neither applied for the provisional assessment nor paid excise duty when the escalated bills were raised or payment was received;

� A part of excise duty was paid only when it was pointed out by the DGAE."

The above findings clearly show that the Assessee wanted to evade duty. These findings have been upheld by the Tribunal. There is no illegality in these findings. In view of this it is held that the Assessee is liable to pay penalty under Section 11AC of the Act. But the question is how much is it required to pay as Section 11AC was inserted during the period the escalated bills were raised.

Section 11AC was inserted in the Act with effect from 28-9-1996, that is to say that the penalty under Section 11AC of the Act could only be imposed w.e.f. 28-9-1996. In view of the same, only penalty equal to the amount of the excise duty short-paid for the period from 28-9-1996 to 31-8-1998 can be imposed.

In view of above, both the questions are partly answered in favour of the Assessee as well as the Department and it is held that the Assessee is liable to pay the penalty under Section 11AC of the Act equal to the amount of the excise duty short-paid from 28-9-1996 to 31-8-1998. With the aforesaid observations, the tax case is partly allowed.