Intentional Short Payment Of Excise Duty: CESTAT Upholds Penalty

The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has upheld the penalty under Section 11AC of the Central Excise Act, 1944, on the ground of intentional short payment of excise duty.

The bench of Ramesh Nair (judicial member) observed that once the appellant had obtained the NOC and the unit was debonded, they intentionally avoided the payment of short duty. It was only by pointing out the audit that the appellant had paid the duty. The appellant knew that before debonding, they were required to pay duty on all the goods lying in the factory, but they consciously did not pay the duty, which amounts to suppression of fact.

The appellant's unit was initially an EOU, which later underwent debonding on January 28, 2008. During the course of the audit, it was pointed out that there was a short payment of duty amounting to Rs. 21,38,277 in central excise duty payable on the stock of goods.

The audit was undertaken in September and October 2008. The appellant, on being pointed out by the audit, deposited the amount of duty along with interest.

A show cause notice was issued, wherein the demand for short payment of duty was confirmed and the duty, along with payment of interest, has been appropriated. Apart from duty and interest, a demand for equal penalties under Section 11AC was imposed.

The appellant appeared before the adjudicating authority as well as the Commissioner (Appeals) and agitated only in respect of the imposition of a penalty under Section 11AC. The authorities have held that the appellant was liable for a penalty of an equal amount under Section 11AC.

The appellant submitted that, on being pointed out by the audit, the appellant immediately paid the short payment of duty along with interest. There was no mala fide intent on the part of the appellant; therefore, the penalty under Section 11AC was not imposed. The demand was raised within the normal period of one year, so the penalty should not be imposed.

The department contended that the appellant calculated the duty while debonding from EOU on the stock as of 03.01.2008. There was the subsequent receipt of the goods, and the same was neither informed to the department nor was the duty thereon paid suo moto. It is only after being pointed out by the audit party that they have paid the duty. The appellant was very well aware that the short payment was supposed to be paid at the time of debonding of the unit, but they suppressed this fact until the audit pointed it out; therefore, the penalty under Section 11AC was rightly invoked and imposed by both the lower authorities.

The CESTAT held that the appellant was very conscious while debonding units, and the duty so payable on the stock of the goods as of January 3, 2008, was calculated and paid on that basis. The departmental officers have issued a NOC enabling the appellant to exit EOU status; however, there are some transactions of the goods from 03.01.2008 until 28.01.2008 on which also the duty by EOU was supposed to be paid. The appellant was well aware that the duty due on the stock was required to be paid for the debonding of the EOU.

Case Title: Meghmani Organics Ltd. Versus C.C.E. & S.T.-Surat-ii

Citation: Excise Appeal No.102 of 2012

Date: 20.10.2022

Counsel For Appellant: Advocate Amal Dave

Counsel For Respondent: Superintendent (AR) Vijay G. Iyengar

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