CESTAT, Larger Bench's decision in the case of Commissioner of Central Excise, Delhi IV v. ILPEA Paramount Pvt. Ltd. [2007 (213) E.L.T. 500 (Tri.-LB)] - Central Excise - Letter F. No. 275/67/2007-CX. 8A

Letter F. No. 275/67/2007-CX. 8A Dated 24-8-2007 Government of India Ministry of Finance (Department of Revenue) Central Board of Excise Customs, New Delhi Subject : CESTAT, Larger Bench's decision in the case of Commissioner of Central Excise, Delhi IV v. ILPEA Paramount Pvt. Ltd. [2007 (213) E.L.T. 500 (Tri.-LB)] The question of levy of equal penalty mandated in the provisions of Section 11AC of the Central Excise Act, 1944 and Section 114A of the Customs Act, 1962 in a situation when warranted has been engaging attention of the Board for quite some time. In several judgments/decisions rendered by various Tribunals/Court a view have been taken that the penalty imposable under Section 11AC of the Central Excise Act or Section 114A of the Customs Act mandate a maximum limit of penalty which is imposable as a consequence the adjudicating/appellate authorities are vested with the powers of discretion. In a recent judgment the Hon'ble Larger Bench of the CESTAT vide their Final Order No. 278/2007-CX dated 21st June, 2007 in the case of Commissioner of Central Excise, Delhi-IV v. ILPEA Paramount Pvt. Ltd., in remand proceedings (as directed by the Hon'ble Punjab Haryana High Court) have categorically held that it cannot be contended that Section 11AC provides liability to pay a penalty equal to the duty determined only as a maximum penalty that could be levied, giving a discretion to impose any lesser amount (except in situations as specifically provided for by amended Section 11AC). There have been a catena of decisions of various judicial for as wherein it has been hitherto held that penalty imposable under Section 11AC indicated the maximum amount imposable and that the adjudicating/appellate authorities were vested with the discretion for imposition of lesser penalties. The question of imposition of penalty equivalent to the amount of duty evaded under Section 11AC whether maximum or not and of discretion to impose lesser amounts, is also pending in appeal before the Hon'ble Supreme Court in a series of appeals filed by the Department. The Hon'ble Punjab Haryana High Court in the case of ILPEA Paramount Pvt. Ltd. [2006 (204) E.L.T. 22 (P H) = 2006 (4) S.T.R. 416 (P H)] while allowing the appeal of the Department, had remanded the matter to the Tribunal, inter alia, holding that language of Section 11AC left no room for discretion as regards the quantum of penalty imposable and held that "once the mens rea is established, the quantum is not left to the discretion of the authority." It further held that "condition precedent for levy of penalty is statutory laid down and in the said situations, making a provision for minimum penalty cannot be held to be arbitrary in any manner." (Para 20) In the remand proceedings, the Tribunal not only restored the original order imposing the penalty equal to the amount of duty confirmed. It further held that prior to amendment (dated 12-5-2000) Section 11AC left no scope for any discretion as regards quantum of penalty imposable. It has been held by the Larger Bench of the Tribunal that - Para 14.1 ".....When the ingredients laid down in the proviso of Section 11A(1) for invoking the extended period of limitation and in Section 11AC for imposition of penalty are identical, in a case where these ingredients are satisfied for invoking the extended period of limitation, that very finding will enure for the purpose of imposing penalty under Section 11AC. In other words, there can be no warrant for holding that though there is fraud or suppression or violation of the provisions of the Act or the rules with intent to evade duty so as to justify invoking the extended period of limitation, notwithstanding such finding, penalty may not be imposed under Section 11AC. On the same facts and in the same case, there would be no warrant for ignoring the findings reached for the purpose of invoking the extended period of limitation, while deciding the question of penalty under Section 11AC............." Para 15 "Once it is held that imposition of penalty under Section 11AC Act is warranted, the wordings of Section 11AC do not leave any option for imposing a reduced penalty, except as specifically provided for in the amended provisions of Section 11AC...........Any discretion to impose lesser penalty except the one, which is specifically contemplated by the first proviso to Section 11AC will obviously defeat the purposes sought to be achieved by the said provision, by adopting the deterrent standard of imposing penalty equal to the duty determined, .........The above provisions of Section 11A leave no scope for contending that Section 11AC provides liability to pay a penalty equal to the duty determined only as a maximum penalty that could be levied, giving a discretion to impose any lesser amount....." The above cited Tribunal's decision is an important authority on the subject and has considered the legal provisions in a very comprehensive, holistic and detailed manner, setting to rest the controversies as created by a host of decisions on the subject matter creating all round confusion in the field. It is proposed that the aforesaid decision could be kept in mind while deciding the question of imposition of penalty under Section 11AC of the Central Excise Act or Section 114A of the Customs Act as it lays to rest the disparity of practices in the field formations arising out of two diametrically opposite viewpoints as held by various judicial bodies and for the guidance and action of the field officers in similar circumstances.