2006 (7) TMI 37 - HC - Central Excise

Central Excise Once duty as required was not paid at the time of clearance of goods but paid much later in point of time such event attracted rigour of Section 11AC of CEA 1944 Tribunal reduced the penalty u/s 11AC as duty was paid prior to issuance of SCN

Summary

Issues:
Appeal under Section 35G of Central Excise Acts against Tribunal's order; Imposition of penalty under Section 11AC; Reduction of penalty by Tribunal to Rs. 50,000 from Rs. 2,26,578; Payment of excise duty exceeding exemption limit; Deposit of duty prior to show cause notice issuance; Interpretation of Section 11AC; Appellant's awareness of excise duty payment limit.

Analysis:
The appeal was filed against the Tribunal's order upholding the imposition of penalty under Section 11AC. The appellant, engaged in manufacturing excisable goods, exceeded the exemption limit, leading to the payment of excise duty exceeding Rs. 30 lac. The show cause notice proposed duty demand, penalties, and interest. The Commissioner of Appeals set aside the penalties, but the Tribunal restored the Adjudicating Authority's order, reducing the penalty to Rs. 50,000 from Rs. 2,26,578. The Tribunal found that the duty payment post-notice issuance was not voluntary and upheld the penalty under Section 11AC, along with interest under Section 11AB.

The Tribunal's decision was based on the mandatory nature of Section 11AC, emphasizing that duty payment after being caught by the Department does not absolve the appellant from penalty. The Tribunal reduced the penalty due to mitigating circumstances but upheld the penalty's imposition. The appellant's awareness of the exemption limit and subsequent failure to pay duty upon exceeding it formed the basis for penalty imposition. The Tribunal's interpretation of Section 11AC as clear and unambiguous supported the penalty imposition.

The appellant's argument that duty deposit prior to the show cause notice issuance should negate Section 11AC penalty was rejected. The timing and correctness of duty payment as per the Act's provisions were deemed crucial, not the payment based on the appellant's discretion. Prior decisions cited by the appellant were deemed distinguishable as they did not address the scope of Section 11AC, focusing on different legal aspects.

The Tribunal's decision to reduce the penalty to Rs. 50,000 was considered a substantial relief for the appellant, given the duty deposit before the notice. The appellate jurisdiction refrained from interfering with the Tribunal's discretion in penalty reduction. Ultimately, the Court concurred with the Tribunal's view and dismissed the appeal, affirming the penalty imposition under Section 11AC and interest under Section 11AB.