1. This is a Department's appeal against the order of the Commissioner (Appeals) No. 156-158/2006(Ahd-I), dt.31.7.06, seeking enhancement of penalty from Rs. 25,000/- to Rs. 3,75,000/-. The Cross Objection No.E/CO/2/07 is connected to this appeal.
a) The respondent is a manufacturer of instant food products, both exempted and dutiable variety. To determine the eligibility for small scale exemption for the year 2003-04 the value of clearances for the previous financial year 2002-2003 becomes relevant. There was allegation that the value of certain exempted clearances during the year 2002-03 were not taken into account and subsequently they have availed the small scale exemptions for the year 2003-04.
b) The original authority confirmed the demand of duty amounting to Rs. 7,73,047/- along with interest and imposed a penalty of Rs. 3,75,000/- under Section 11AC read with Rule 25 of Central Excise Rules, 2002.
c) The Commissioner (Appeals) holding that it was a bona fide error of interpretation reduced the penalty to Rs. 25,000/-.
4. The learned DR seeks to enhance the penalty from Rs. 25,000/- to Rs. 3,75,000/- as imposed by the original authority. For this purpose, he reiterates findings of the original authority.
5. I have carefully considered the submissions made by the learned DR and also perused the records. This is not a case of clandestine removal. The dispute related to determining the value of clearance of the previous year. The assessee was manufacturing goods which were excisable as well as exempted. The assessee was also manufacturing certain branded as well as non-branded goods. The manner of determining the value of clearances excluding certain types of clearances and including certain types of clearances was the basis for the dispute.
That there was a mistake in correctly calculating the value of clearances can not lead an inference of any deliberate intention by way of mis-declaration or suppression of relevant facts. The original authority, though has invoked Section 11AC, has not imposed penalty equal to the duty found to have been evaded. The Commissioner (Appeals) has given the following reason for reducing the penalty.
I do notice that the appellants were bonafidely under the mis-apprehension that the goods which were exempted, their value need not be added while eligibility criteria for deciding the availability of exemption notification to SSI unit was concerned. In fact, the departmental officers ought to have been vigilant on cases specific in of SSI units. Looking to the size of plant and machinery as such and about those who were manufacturing more than one item to see are eligible for SSI exemption when the conditions for deciding eligibility criteria for SSI exemption was got changed under Notification No. 8/2003 CE dt. 1.3.03. The appellants had accepted the duty liability very gracefully.... The provisions of penalty stands rightly invoked. However, on the quantum of penalty, they are more than enough mitigating circumstances warranting imposition of penalty for much lesser amount. Therefore, I hereby reduce the penalty on the appellant from Rs. 3.75 lakhs to only Rs. 25,000/-.
6. The Commissioner (Appeals) has reduced the penalty based on the above findings. No valid grounds have been adduced to interfere with the above findings of the Commissioner (Appeals). Therefore, the appeal is liable to be rejected. The Cross objection filed by the respondent seeks upholding the order of the Commissioner (Appeals).
7. In the light of the above, the appeal filed by the department is rejected. The cross objection connected to this appeal is also disposed off accordingly.