2011 (5) TMI 760 - AT - Central Excise

Penalty - appellate authority has reduced the mandatory penalty - respondent was not given an option to pay reduced penalty of 25% as per proviso (1) and (2) of Section 11AC of the Act Held that - option given to the respondent if they have paid duty along with interest within 30 days of the communication of the adjudication order then the penalty shall be reduced to 25% of the duty confirmed to quantify the amount of penalty the matter is sent back to the adjudicating authority appeal is disposed of

Summary

Issues:
Reduced penalty under Section 11AC in Central Excise Act, 1944.

Analysis:
The appeal was filed by the Revenue against the impugned order confirming duty but reducing the penalty under Section 11AC to Rs.10,000. The respondent, a manufacturer of sugar and molasses, cleared sugar as levy sugar initially and later converted it into free sale sugar without paying the differential duty. The Commissioner (Appeals) confirmed the duty demand but reduced the penalty. The main issue was the reduction of the mandatory penalty under Section 11AC, which the appellate authority did not have the power to do. The Tribunal referred to the decision of the Hon'ble Apex Court in Union of India vs. Rajasthan Spinning & Weaving Mills, stating that in cases of fraud or willful misstatement to evade duty payment, the penalty should be equivalent to the duty payable.

The Tribunal noted that the respondent was not given the option to pay a reduced penalty of 25% as per the proviso in Section 11AC. Therefore, the Tribunal provided the respondent with the option to pay duty along with interest within 30 days of the communication of the adjudication order, after which the penalty would be reduced to 25% of the duty confirmed. The matter was remanded back to the adjudicating authority to quantify the penalty amount based on this direction. The appeal was disposed of with this observation, and the Cross Objection was also disposed of accordingly.

This judgment clarifies the application of Section 11AC of the Central Excise Act, 1944 in cases involving willful misstatement or suppression of facts to evade duty payment. It emphasizes that penalties should be equivalent to the duty payable in such cases, as established by previous judicial decisions. The Tribunal's decision to provide the respondent with the option to pay a reduced penalty if the duty is paid within a specified timeframe ensures fairness while upholding the legal provisions.