2011 (4) TMI 323 - SC - Central Excise

Quantum of penalty - Provisions of Section 11AC - Delay of one or two days in making payment of duty - penalty was reduced to Rs. 1 lakh as against Rs. 17, 06, 632/- refer to the decision of the Division Bench of this Court in Union of India v. Rajasthan Spinning and Weaving Mills and Commissioner of Customs and Central Excise v. Lanco Industries Ltd. reported in (2009 -TMI - 33419 - SUPREME COURT OF INDIA) the Tribunal was not justified in reducing the quantum of penalty to only Rs. 1 lakh in view of the mandatory provisions of Section 11AC of the Central Excise Act.

Summary

Issues:
- Reduction of penalty by the Tribunal based on delay in payment of duty
- Imposition of penalty under Section 11AC of the Central Excise Act
- Quantum of penalty under Section 11AC challenged in appeal

Issue 1: Reduction of penalty by the Tribunal based on delay in payment of duty
The respondent appealed against the imposition of duty due to a delay in payment of duty by one or two days. The Tribunal accepted the respondent's contention, citing the minor delay as grounds for a lenient view. Consequently, the penalty was reduced significantly from Rs. 17,06,632 to Rs. 1 lakh.

Issue 2: Imposition of penalty under Section 11AC of the Central Excise Act
The appellant issued a show cause notice alleging that the assessee cleared goods with less payment or without payment of duty, violating Central Excise Rules and Section 11A of the Central Excise Act. The Commissioner found the charge of duty evasion through misstatement, suppression, and fraud to be proven, justifying the application of the extended five-year period under Section 11A. The Commissioner imposed a penalty equal to the duty payable under Section 11AC, amounting to 100% of the duty evaded.

Issue 3: Quantum of penalty under Section 11AC challenged in appeal
The respondent appealed the Commissioner's order before the Tribunal, focusing solely on the quantum of penalty under Section 11AC. The Tribunal reduced the penalty to Rs. 1 lakh, prompting the appellant to challenge this decision. The appellant argued that the penalty should be in line with Section 11AC's mandatory provisions, emphasizing that the penalty must be equal to the duty determined under Section 11A(2). The respondent contended that the delay in payment was minimal and justified the reduced penalty. However, the Supreme Court, referencing past judgments, held that once Section 11AC applies, the penalty must be equal to the duty determined under Section 11A(2). The Court rejected the respondent's argument and reinstated the Commissioner's order, emphasizing that no other provisions were proven applicable or pleaded.

In conclusion, the Supreme Court allowed the appeal, setting aside the Tribunal's order and restoring the Commissioner's decision without costs.