2004 (12) TMI 582 - AT - Central Excise

Summary

Issues involved:
Claim of reduced penalty under proviso to Section 11AC for Central Excise duty and interest payment.

Analysis:
The case involved the appellant, a manufacturer of iron and steel ingots, who took ineligible Modvat credit for scrap procured. Central Excise Officers detected this irregularity, leading the appellant to debit the credit wrongly taken and pay a penalty. The Deputy Commissioner, during adjudication, confirmed the CENVAT credit amount and imposed an equal penalty under Rule 173Q, along with a demand for interest under Section 11AB. The appellant, having paid duty and penalty, sought the benefit of reduced penalty as per the proviso to Section 11AC. The proviso states that if duty and interest are paid within thirty days from the communication of the order, the penalty shall be 25% of the duty determined. The Commissioner rejected the claim, arguing that interest payment was also necessary to qualify for the proviso's benefit. The appellant contested this decision in the appeal, emphasizing that they had reversed the credit, paid the penalty, and subsequently cleared the interest. The Tribunal recognized that the appellant had fulfilled the conditions of the proviso by paying the duty, penalty, and interest, entitling them to the reduced penalty. Consequently, the appeal was allowed, granting the appellant the benefit of the proviso to Section 11AC.

This judgment highlights the importance of timely payment of duty, penalty, and interest in availing the reduced penalty benefit under Section 11AC's proviso. It underscores that once an irregularity is identified, prompt corrective action, including payment of dues and penalties, can impact the final penalty amount imposed during adjudication. The Tribunal's decision in this case demonstrates a strict adherence to statutory provisions and a clear interpretation of the conditions necessary to qualify for reduced penalties under the Central Excise Act. The ruling serves as a reminder to taxpayers and manufacturers to comply with excise regulations diligently and promptly address any identified discrepancies to avoid escalated penalties and interest liabilities.