Commissioner Of Central Excise, ... vs Kay Bouvet Engg. Pvt. Ltd

(Arising out of Orders-in-Appeal No. PII/229/2006 dated 18.8.2006 and No. PII/BKS/165/2006 dated 26.5.2006 passed by Commissioner of Central Excise (Appeals), Pune-II)

For approval and signature:

Honble Mr. P.K. Jain, Member (Technical)

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1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the :

CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

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4. Whether Order is to be circulated to the Departmental : Yes authorities?

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Commissioner of Central Excise, Pune-II Appellant Vs. Kay Bouvet Engg. Pvt. Ltd. Respondent

Appearance: Shri V.K. Agrawal, Additional Commissioner (AR), for appellant Shri S. Narayanan, Advocate, for respondent

CORAM: Honble Mr. P.K. Jain, Member (Technical)

Date of Hearing: 9.1.2015 Date of Decision: 9.1.2015

ORDER NO

A show cause notice dated 18.6.2005 was issued to the respondent. The show cause notice demanded a duty of Rs.12,47,481/- along with interest and penalties. The demand consisted of three components. The first component was relating to the cenvat credit availed on capital goods sent to job workers premises and the duty involved on this count was Rs.7,25,375/-. The second issue was relating to shortage of 132 MT of material and the duty involved was Rs.4,31,387/-. The third issue was relating to depreciation on excise duty portion of capital goods and the duty involved on this issue is Rs.9,719/-. As far as the third issue is concerned, the respondents have already paid the duty, interest and penalty and the matter in fact was decided by this Tribunal and, therefore, the respondents are not disputing the same and is not a matter before this Tribunal in these appeals.

2. As far as the first two issues are concerned, the respondents have paid the duty and interest and they are not disputing the same. However, the Revenue is disputing non-imposition of penalty under Section 11AC of the Central Excise Act on these two issues. From the facts it appears that the show cause notice dated 18.6.2005 was adjudicated vide order-in-original dated 22.2.2006, wherein penalties on the first two issues were not imposed keeping in view the Tribunals judgment in the case of Rashtriya Ispat Nigam Ltd. vs. CCE reported in 2003 (161) ELT 185 (Tri.). The Revenue filed appeal against the said order. However, the two appeals were decided by separate orders by Commissioner (Appeals). In the first order he has upheld the order of the lower authority. In the order which was relating to the appeal filed by the Revenue, he did not go into the merits of the case due to the doctrine of merger. The Revenue has filed appeals against both the orders of the Commissioner (Appeals) and both the appeals are relating to non-imposition of penalty under Section 11AC. In the impugned order dated 18.8.2006, the Commissioner (Appeals) has relied upon the Honble Supreme Courts decision in the case of Kunhayammed vs. State of Kerala reported in 2001 (129) ELT 11 (SC), wherein it is held that once the superior authority having jurisdiction has disposed of the lis either way, it is the order of the superior authority which is final, binding and operative order which merges the order passed by the authority below.

I find that in this particular case the Commissioner (Appeals) in the order dated 26.5.2006 has not gone into the merits about the imposition of penalty under Section 11AC on the first two issues and, therefore, the lis has not been decided. A particular order may have number of issues and the above doctrine of merger would be relevant on each issue separately. Since whether the penalty can be imposed under Section 11AC on the first two issues has not been decided by the Commissioner (Appeals), I set aside the impugned order inasmuch as the issue relating to imposition of penalty under Section 11AC on the first two issues is concerned. I also note that even the original authority has not gone into the question whether the ingredients of Section 11AC are satisfied, but has dropped the penalty only on the grounds that the amount was paid before issuance of the show cause notice and in view of the judgment of this Tribunal in the case of Rashtriya Ispat Nigam Ltd. (supra), no penalty is imposable. There are subsequent judgments on this issue from the Honble Supreme Court, wherein it has been clarified that for imposition of penalty under Section 11AC, the adjudicating authority has to examine whether the facts and circumstances of the case satisfy the ingredients laid down under Section 11AC.

In view of the said position, the matter is remanded to the original authority who will grant opportunity of personal hearing to the respondents and thereafter decide about the imposition of penalty under Section 11AC in respect of the first two issues, viz. cenvat credit availed on capital goods sent to job worker and shortage of material found during the visit. The two appeals are allowed by way of remand in above terms. The cross objections filed by the respondents are also disposed of.

(Operative part pronounced in Court)

(P.K. Jain) Member (Technical)

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