COMMISSIONER OF CENTRAL EXCISE Vs. SUPREME INDUSTRIES LIMITED

JUDGEMENT

(1.) This appeal by the Revenue is directed against the Final Order passed by the Customs Excise & Service Tax Appellate Tribunal (Tribunal) dated 02.11.2005, by which the appeal filed by the respondent/assessee was partly allowed, whereby the demand of duty was confirmed and the penalty and interest were set aside. This appeal has been admitted on the following substantial question of law:-

(2.) The respondent/assessee is engaged in the manufacture of plastic articles availing Modvat/Cenvat credit facilities. On a verification done at their factory, shortage of XLPE scrap was found. This resulted in issuance of show cause notice dated 10.10.2001, demanding Modvat credit of Rs.5,52,045/- under Rule 57I of the Central Excise Rules, 1944, (Rules) and a proposal to confirm and adjust the amount paid already and to charge interest under Section 11AB of the Central Excise Act, 1944 (Act) and impose penalty under Rule 173Q of the Rules and penalty under Section 11AC of the Act. The assessee submitted their reply and the Adjudicating Authority confirmed the demand of credit taken to the tune of Rs.2,51,177/- along with interest and imposed penalty of equal amount on the ground that the scrap account was manipulated and there has been removal of scrap without payment of duty. The appeal filed by the first respondent/assessee before the Commissioner (Appeals), was rejected by order dated 23.03.2004. Challenging the same, the first respondent preferred appeal to the Tribunal. The Tribunal after considering the case of both parties, confirmed the demand of duty and set aside the penalty and interest on the ground that duty amount was paid prior to issuance of show cause notice.

(3.) Aggrieved by such order of the Tribunal, the Revenue is on appeal contending that the penalty imposed under Section 11AC and interest charged under Section 11AB of the Act, are sustainable, even if duty is paid before issuance of show cause notice irrespective of the fact that evasion of duty was deducted by the department and the demand was made under proviso to Section 11A(1) on reason of suppression of facts or willful misstatement or contravention of the provisions of Central Excise Act.