Indian Oil Corporation Vs. Commissioner of C. Ex., Meerut - Court Judgment

Excerpt:
1. this appeal has been filed by the appellants against the impugned order-in-original dated 19-1-2001 vide which the commissioner has confirmed the duty of rs. 55,44,370/- and imposed penalty of equal amount under section 11ac and also of rs. 15,00,000/- under rule 173q and 210 of the central excise rules, besides ordering the payment of interest under section 11ac of the act.2. the appellants are a registered dealer. they are receiving the duty paid petroleum products from the manufacturer (refineries) and clearing the same to the customers on cum-duty prices. the selling prices of petroleum products are administered by their head office and it is on their instructions that the increase or decrease in cum-duty prices is done by the depot office. due to upward revision of the prices for the stock in hand at the appellants' depot, the differential duty was charged by them from the customer by including in cum-duty price, but the same was not paid by them to the central excise department. the appellants were found clearing the petroleum goods on higher cum-duty prices without depositing the differential duty, so collected, in accordance with section 11d of the act. they were accordingly served with a show cause notice and after getting their reply, the commissioner confirmed the duty and imposed the penalties, as detailed in the impugned order.4. so far as the confirmation of the duty demand is concerned, the correctness of the same has not been disputed before us. what has been challenged before us by the learned counsel is the imposition of penalty equal to the amount of duty in terms of section 11 ac and penalty under rules 173q and 210 of the rules, arid also charging of interest. the learned counsel has contended that the provisions of sections 11ac and 11ab were not attracted to the present case as the amount allegedly not paid by the appellants was riot part of the duty but was the amount which was collected in excess of the duty and which in terms of section 11ad was required to be deposited with the central government. similarly, the provisions of rules 173q and 210 of the rules were also not attracted to the case of the appellants.5. on the other hand, the learned sdr has simply reiterated the correctness of the impugned order.6. it has not been disputed before us that penalty under section 11ac can be imposed where any duty of excise has not been levied or paid or has been short levied or short paid. similarly, the payment of interest under section 11ab can be demanded only where any duty of excise has not been levied or has been short levied or short paid. but in the instant case, such has not been the position. there was no short payment of duty by the appellants. they only failed to pay the amount which they collected in excess of the duty from the buyers, in terms of section 11d. therefore, they could be only directed to pay that amount, and no penalty under section 11ac could be legally imposed on them.similarly, the demand of interest under section 11ab of the act also could not be raised from them. for these very reasons, the provisions of rules 173q and 210 of the rules could not be invoked for imposition of penalty on the appellants. therefore, the impugned order to this extent cannot be legally sustained and deserves to be set aside.7. in view of the discussion made above, the impugned order of the commissioner regarding imposition of the penalty under section 11ac and rule 173q as well as 210 of the rules and demanding interest under section 11ab, is set aside, while in respect of demand of duty the impugned order is upheld.

Judgment:
1. This appeal has been filed by the appellants against the impugned order-in-original dated 19-1-2001 vide which the Commissioner has confirmed the duty of Rs. 55,44,370/- and imposed penalty of equal amount under Section 11AC and also of Rs. 15,00,000/- under Rule 173Q and 210 of the Central Excise Rules, besides ordering the payment of interest under Section 11AC of the Act.

2. The appellants are a registered dealer. They are receiving the duty paid petroleum products from the manufacturer (Refineries) and clearing the same to the Customers on cum-duty prices. The selling prices of petroleum products are administered by their Head Office and it is on their instructions that the increase or decrease in cum-duty prices is done by the depot office. Due to upward revision of the prices for the stock in hand at the appellants' depot, the differential duty was charged by them from the customer by including in cum-duty price, but the same was not paid by them to the Central Excise Department. The appellants were found clearing the petroleum goods on higher cum-duty prices without depositing the differential duty, so collected, in accordance with Section 11D of the Act. They were accordingly served with a show cause notice and after getting their reply, the Commissioner confirmed the duty and imposed the penalties, as detailed in the impugned order.

4. So far as the confirmation of the duty demand is concerned, the correctness of the same has not been disputed before us. What has been challenged before us by the learned Counsel is the imposition of penalty equal to the amount of duty in terms of Section 11 AC and penalty under Rules 173Q and 210 of the Rules, arid also charging of interest. The learned Counsel has contended that the provisions of Sections 11AC and 11AB were not attracted to the present case as the amount allegedly not paid by the appellants was riot part of the duty but was the amount which was collected in excess of the duty and which in terms of Section 11AD was required to be deposited with the Central Government. Similarly, the provisions of Rules 173Q and 210 of the Rules were also not attracted to the case of the appellants.

5. On the other hand, the learned SDR has simply reiterated the correctness of the impugned order.

6. It has not been disputed before us that penalty under Section 11AC can be imposed where any duty of excise has not been levied or paid or has been short levied or short paid. Similarly, the payment of interest under Section 11AB can be demanded only where any duty of excise has not been levied or has been short levied or short paid. But in the instant case, such has not been the position. There was no short payment of duty by the appellants. They only failed to pay the amount which they collected in excess of the duty from the buyers, in terms of Section 11D. Therefore, they could be only directed to pay that amount, and no penalty under Section 11AC could be legally imposed on them.

Similarly, the demand of interest under Section 11AB of the Act also could not be raised from them. For these very reasons, the provisions of Rules 173Q and 210 of the Rules could not be invoked for imposition of penalty on the appellants. Therefore, the impugned order to this extent cannot be legally sustained and deserves to be set aside.

7. In view of the discussion made above, the impugned order of the Commissioner regarding imposition of the penalty under Section 11AC and Rule 173Q as well as 210 of the Rules and demanding interest under Section 11AB, is set aside, while in respect of demand of duty the impugned order is upheld.