2009 (7) TMI 76 - HC - Central Excise

Penalty u/s 11AC in the SCN penalty was sought to be imposed but CESTAT ignored this fact and set aside the penalty Held that The main grounds raised are that the assessee had disclosed all the facts and the officials of the Excise Department had verified the facts and therefore the assessee had not mis-represented any facts. According to the learned counsel the limitation would therefore be only six months and not five years. All the authorities below including the CEGAT have held that there was mis-representation of facts by the Respondent. This is a pure finding of fact and cannot be called in question in these proceedings. Penalty is liable to be imposed.

Summary

Issues:
1. Interpretation of Section 11AC of the Central Excise Act, 1944 and Rule 173Q of Central Excise Rules, 1944.
2. Application of penalty provisions to the period prior to 28.9.1996.
3. Challenge to penalty imposition under Section 11AC and Rule 173Q.
4. Misrepresentation of facts by the assessee and its impact on the limitation period.

Interpretation of Section 11AC and Rule 173Q:
The case involved a dispute regarding the imposition of penalty under Section 11AC of the Central Excise Act, 1944, read with Rule 173Q of the Central Excise Rules, 1944. The Tribunal was questioned for not considering the applicability of Rule 173Q which was inserted before Section 11AC. The Court emphasized that even if Section 11AC was not applicable, Rule 173Q could justify the penalty imposition. The judgment cited a previous case to establish that Rule 173Q allows for penalties up to three times the value of goods, and in this case, the penalty was equivalent to the duty imposed. Therefore, the penalty under Rule 173Q was deemed lawful.

Application of Penalty Provisions to the Period Prior to 28.9.1996:
The Tribunal had set aside the penalty under Section 11AC considering its insertion in the Act from 28.9.1996, which did not cover the period in question. However, the Court clarified that Rule 173Q, applicable before Section 11AC, empowered the authorities to impose penalties. The Court highlighted that the penalty amount in this case was justified under Rule 173Q, even if Section 11AC was not applicable for the period preceding 28.9.1996.

Challenge to Penalty Imposition under Section 11AC and Rule 173Q:
The Revenue challenged the Tribunal's decision to set aside the penalty imposed under Section 11AC. The Court referred to a previous judgment to support its stance that penalties under Rule 173Q were valid and not solely reliant on Section 11AC. The Court emphasized that the penalty amount, being equivalent to the duty imposed, was lawful under Rule 173Q. Consequently, the Court quashed the Tribunal's decision to set aside the penalty.

Misrepresentation of Facts and Limitation Period:
The assessee contended that there was no misrepresentation of facts, limiting the liability period to six months instead of five years. However, all lower authorities, including the CEGAT, found misrepresentation by the assessee. The Court upheld this finding as a factual determination beyond the scope of the present proceedings. As a result, the Court rejected the Excise Reference No.1 of 2008.

In conclusion, the Court partly allowed Excise Reference No.14 of 2003, reinstating the penalty imposed under Rule 173Q, and rejected Excise Reference No.1 of 2008. The judgment clarified the application of penalty provisions, emphasizing the validity of penalties under Rule 173Q even in the absence of Section 11AC for the relevant period.