2011 (5) TMI 762 - AT - Central Excise

Penalty - demand of duty - denial of CENVAT credit - whether penalty under Section 11AC of the Act is avoidable on the ground that the duty was paid prior to issue of show-cause notice Held that - respondent is liable to be penalised under Section 11AC of the Central Excise Act as rightly held by the original authority order is set aside and this appeal is allowed

Summary

Issues:
1. Imposition of penalty under Section 11AC of the Central Excise Act on the respondent.
2. Reversal of CENVAT credit by the assessee prior to the show-cause notice.
3. Interpretation of penalty imposition conditions under Section 11AC based on legal precedents.

Analysis:
1. The appeal filed by the Revenue sought the imposition of a penalty on the respondent under Section 11AC of the Central Excise Act. The original authority confirmed a demand of duty against the assessee under Section 11A(1) of the Act and imposed a penalty equal to duty under Section 11AC, along with interest under Section 11AB. The assessee appealed against the penalty imposition, which was allowed by the Commissioner (Appeals), leading to the Revenue's present appeal.

2. The CENVAT credit in question had been reversed by the assessee before the show-cause notice was issued. The lower appellate authority, citing a Tribunal's Larger Bench decision, held that the penalty under Section 11AC was not sustainable due to this reversal. The Revenue's appeal relied on various decisions and argued for the penalty imposition despite the reversal of credit. The learned SDR contended that the issue of penalty imposition post-duty payment was settled by the Supreme Court in a specific case.

3. The Tribunal, after considering the submissions, found merit in the Revenue's argument. It noted that the lower appellate authority set aside the penalty solely based on the credit reversal before the notice, without addressing the imposability of the penalty itself. Referring to the Supreme Court's ruling in a similar case, the Tribunal held that the liability for penalty under Section 11AC remains even if the duty is paid before or after the show-cause notice. Consequently, the Tribunal allowed the Revenue's appeal, setting aside the lower appellate authority's decision and upholding the penalty imposition on the respondent as per Section 11AC.