Penalty under S.11AC(1)(c) upheld for suppression despite pre-SCN duty payment; proviso to S.11AC(1)(a) inapplicable.

JUDGMENT :

N.ANAND VENKATESH, J.

The appellant company has assailed the order passed by the Customs Excise and Service Tax Appellate Tribunal, Chennai, (CESTAT) made in final order No.41626/2021 dated 01.07.2021.

2. The appellant, who is the assessee was subjected to central excise audit conducted during the months of February 2017 and April 2017. During the course of audit, it was noticed that the assessee has availed CENVAT credit on excise duty paid on capital goods purchased during the year 2013-14. The assessee had availed CENVAT credit on 50% of the excise duty paid on the capital goods during the year 2013-14 and the remaining CENVAT credit available was taken during the subsequent year 2014-15. On scrutiny of the fixed asset schedule attached to the financial statements and plant and machinery ledger account furnished for the year 2013-14, it was found that no capital goods were added to the fixed assets pertaining to the plant and machinery and the capital goods on which the CENVAT credit was availed during every month of the year 2013-14 had been cleared to M/s.Beach Minerals company at the end of the same month by making a credit entry in the plant and machinery account every month in the name of M/s.Beach Minerals Company. In view of the above, a show cause notice dated 08.12.2017 came to be issued by the Joint Commissioner calling upon the appellant to show cause as to why demand of excise duty, interest and penalty should not be imposed under Section 11A of the Central Excise Act 1944 (hereinafter referred to as 'the Act') read with Rule 14(1) (II) of CENVAT Credit Rules 2004 (for brevity hereinafter referred to CCR) and Section 11A A of the Act read with Rule 14(1)(II) of and Section 11(AC) of the Act read with Rule 15(2) of the CCR.

3. Adjudication proceedings were initiated by the office of the Joint Commissioner and after affording an opportunity to the appellant, an order came to be passed by the assessing authority on 26.02.2018 demanding towards duty, interest and also towards imposition of penalty.

4. Pursuant to the order passed by the assessing authority, the appellant made payment towards interest component. In the meantime, the assessee had already paid the duty component as early as during the month of April 2017 even before the issuance of the show cause notice.

5. The appeal came to be filed before the Commissioner (Appeals) by the appellant challenging the imposition of penalty. The appellate authority through proceedings dated 08.03.2019, upheld the imposition of penalty by the assessing authority and accordingly the appeal was dismissed and the order passed by the assessing authority was confirmed.

6. Aggrieved by the order passed by the appellate authority, the appellant filed an appeal before the CESTAT, Chennai. The CESTAT also confirmed the order passed by the assessing authority. Aggrieved by the same, the present appeal has been filed under Section 35(G) of the Act.

7. When the appeal came up for final hearing on 24.04.2026, the following order came to be passed by this Court by formulating the substantial questions of law:

“When this appeal was admitted and notice was ordered, this Court did not formulate any substantial question of law. Ultimately, after service of notice, the matter was listed for final hearing today. This Court, after hearing both sides, now formulates the following substantial questions of law:

“(i) Whether the penalty imposed against the appellant by the Assessing Officer, which was confirmed up to t