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2017 (2) TMI 566 - GUJARAT HIGH COURT

2017 (2) TMI 566 - GUJARAT HIGH COURT - TMI - Whether the CESTAT is empowered not to impose penalty u/r 173Q of CER, 1944 read with Section 11AC of Central Excise Act, 1944 on the assessee who evaded Central Excise Duty by suppression of facts and in contravention of Rules under Central Excise Law? - Held that: - on considering section 11AC of the Act, 1944 and Rule 173Q of the Rules, 1944, both operates in different fields and the penalty leviable under both the provisions are different. Th .....

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ere a composite penalty is levied under both the provisions i.e. u/r 173Q of the Rules, 1944 and section 11AC of the Act, 1944 and if it is found that it is not possible to bifurcate the penalty imposable u/s 11AC of the Act, 1944 and Rule 173Q of the Rules, 1944 and/or it is not possible to apportion quantum of penalty imposable u/r 173Q of the Rules, 1944 and/or section 11AC of the Act, 1944, in such a case the matter may be remanded to the appropriate Adjudicating Authority to redetermine the .....

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under any of the provisions i.e. either under Rule 173Q of the Rules, 1944 or under Section 11AC of the Act, 1944. - The learned CESTAT has materially erred in quashing and setting aside the order of penalty imposed upon the assessee, imposed u/r 173Q of the Rules, 1944 and Section 11AC of the Act, 1944 - appeal allowed - decided in favor of appellant-Revenue. - TAX APPEAL NO. 799 of 2006 - Dated:- 8-2-2017 - MR. M.R. SHAH AND MR. B.N. KARIA, JJ. FOR THE APPELLANT : MR ANKIT SHAH, ADVOCATE .....

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les, 1944 read with Section 11AC of the Central Excise Act, 1944, the appellant herein - Revenue has preferred the present Tax Appeal to consider the following substantial question of law. Whether the CESTAT is empowered not to impose penalty under Rule 173Q of Central Excise Rules, 1944 read with Section 11AC of Central Excise Act, 1944 on the assessee who evaded Central Excise Duty by suppression of facts and in contravention of Rules under Central Excise Law? [2.0] Facts leading to the presen .....

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,05,07,465/had been illicitly removed by the assessee. The Officers also recovered excess stock of 125 pcs of MMF (P) goods admeasuring 12,644.25 Mtrs. valued at ₹ 2,27,597/which did not tally with the lot register and placed the said goods under seizure. The Officers further recovered excess stock of 131 pcs of semi processed fabrics admeasuring 13,664.50 Mtrs valued at ₹ 1,70,806/which also came to be seized. [2.3] A show cause notice was issued by the Commissioner of, Central Exci .....

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amounting to ₹ 21,01,493.00 (BED : ₹ 12,60,896.00 + AED : ₹ 8,40,597.00) leviable on 5,83,748.00 Mtrs of MMF(P) valued at ₹ 1,05,07,465.00, as detailed in Annexure A to the panchnama dated 20.11.1998 should not be demanded and recovered from them under Rule 9(2) of Central Excise Rules, 1944 read with proviso to section 11A( 1) of the Central Excise Act, 1994; (iii) penalty should not be imposed upon them under Rule 173Q( 1) of Central Excise Rules, 1944 read with section .....

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seized from their custody / control and possession / or from the custody / control of other related persons and vi) interest @ 20% per annum should not be charged / recovered from them on delayed payment of evaded Central Excise duty under section 11AB of Central Excise Act, 1944. [2.4] That the aforesaid show cause notice was adjudicated by the Commissioner vide OIO No.14/MP/99 dated 15.10.1999 who ordered confiscation of the goods seized and raised the demand of duty of ₹ 21,01,493/on th .....

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est @ 20% p.a. on delayed payment of evaded Central Excise duty under Section 11AB of the Central Excise Act, 1944. d) Imposition of penalty equal to duty on the processed MMF under Rule 173Q(1) of the Central Excise Rules, 1944 read with Section 11AC of the Central Excise Act, 1944. e) Imposition of penalty of ₹ 1,00,000/under Rule 209A of the Central Excise Rules on the Director of the assessee. f) Confiscation of land, building, plant and machinery etc. used in the manufacture / product .....

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e penalty on the Director vide impugned judgment and order. However, the learned CESTAT has set aside the penalty imposed under Rule 173Q(1) of the Central Excise Rules, 1944 (hereinafter referred to as Rules, 1944 ) read with Section 11AC of the Central Excise Act, 1944 (hereinafter referred to as Act, 1944 ) on the assessee as well as the confiscation of land, plant, building and machinery etc. with an option to redeem the same on payment of redemption fine of ₹ 20,000/. [2.6] Feeling ag .....

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entral Excise Duty by suppression of facts and in contravention of Rules under Central Excise Law? [3.0] Shri Ankit Shah, learned Counsel appearing on behalf of the appellant - Revenue has vehemently submitted that in the facts and circumstances of the case the learned CESTAT has materially erred in quashing and setting aside the penalty imposed upon the respondent Company under Rule 173Q of the Rules, 1944 read with Section 11AC of the Act, 1944. [3.1] It is further submitted by Shri Shah, lear .....

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avention of the Rules under the Central Excise Laws, the penalty under Rule 173Q of the Rules, 1944 read with Section 11AC of the Act, 1944 is required to be imposed. [3.2] It is submitted by Shri Shah, learned Counsel appearing on behalf of the appellant that in the present case the learned CESTAT has set aside the penalty imposed under Rule 173Q of the Rules, 1944 read with Section 11AC of the Act, 1944 solely on the ground that composite levy of penalty both under Rule 173Q of the Rules, 1944 .....

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on behalf of the appellant that the penalty imposed under Rule 173Q(1) of the Rules, 1944 will be different than that of penalty imposable under Section 11AC of the Act, 1944. It is submitted that in the present case the penalty is imposable under both i.e. under Rule 173Q(1) of the Rules, 1944 as well as under Section 11AC of the Act, 1944. It is submitted that therefore the learned CESTAT has materially erred in quashing and setting aside the penalty imposed under Rule 173Q of the Rules, 1944 .....

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omposite penalty was imposed both under Rule 173Q of the Rules, 1944 and Section 11AC of the Act, 1944, the learned CESTAT has rightly set aside the composite penalty. [4.2] Shri Bairagra, learned Counsel appearing on behalf of the respondent assessee has heavily relied upon the following decisions of the Hon ble Supreme Court as well as this Court in support of his above submissions that levy of composite penalty under Rule 173Q of the Rules, 1944 and Section 11AC of the Act, 1944, is not permi .....

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rned Counsel appearing on behalf of respective parties at length. The short question which is posed for consideration of this Court is whether in the facts and circumstances of the case the learned CESTAT is justified in quashing and setting aside the penalty imposed under Rule 173Q(1) of the Rules, 1944 and Section 11AC of the Act, 1944 solely on the ground that the consolidated levy of penalty both under Rule 173Q of the Rules, 1944 and Section 11AC of the Act, 1944 is not permissible? [5.1] W .....

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acts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, the person who is liable to pay duty as determined under subsection (2) of section 11A, shall also be liable to pay a penalty equal to the duty so determined: Provided that where the duty determined to be payable is reduced or increased by the Commissioner (Appeals), the Appellate Tribunal or, as the case may be, the Court, then, for the purposes of this section, the .....

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im; or (bb) takes credit of duty or money in respect of inputs or capital goods for being used in the manufacture of final products or capital goods for use in the factory of the manufacturer of final product, as the case may be, wrongly or without taking reasonable steps to ensure that appropriate duty on the said inputs or capital goods has been paid as indicated in the invoice or any other document approved under these rules evidencing the payment of excise duty or the countervailing duty, as .....

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redit of duty or money taken thereon as required under these rules, or contravenes any of the provisions contained in Section AA or AAAA of Chapter V of these rules; or (bbb) enters wilfully any wrong or incorrect particulars in the invoice issued for the excisable goods dealt by him with intent to facilitate the buyer to avail of credit of the duty of excise or the additional duty under section 3 of the Customs Tariff Act, 1975 (51 of 1975) in respect of such goods which is not permissible unde .....

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he value of the excisable goods in respect of which any contravention of the nature referred to in clause (a) or clause (b) or clause (bb) or clause (bbb) or clause (c) or clause (d) has been committed, or five thousand rupees, whichever is greater. Explanation.-For the purposes of clause (bb) of subrule (1), a person availing of credit of duty on inputs received by him shall be deemed to have taken "reasonable steps" if he satisfies himself about the identity and address of the manufa .....

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e jurisdiction such manufacturer has his factory or the supplier has his place of business: Provided that where the identity and address of the manufacturer or the supplier is satisfied on the strength of a certificate, the person availing of credit of duty shall retain such certificate for production before the proper officer on demand. Under Section 11AC of the Act, 1944, penalty is imposable / leviable for shortlevy or nonlevy of duty. Section 11AC of the Act, 1944 provides that where any dut .....

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Rules, 1944 is leviable / imposable upon the manufacturer, producer, registered person of a warehouse or a registered dealer. Rule 173Q of the Rules, 1944 provides that subject to the provisions contained in Section 11AC of the Act, 1944, if any manufacturer, producer, registered person of a warehouse or a registered dealer removes any excisable goods in contravention of any of the provisions of the Central Excise Rules, or does not account for any excisable goods manufactured, produced or store .....

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r section 6 of the Act; or contravenes any of the provisions of these rules with intent to evade payment of duty, then, all such goods shall be liable to confiscation and the manufacturer, producer, registered person of a warehouse or a registered dealer, as the case may be, shall be liable to a penalty not exceeding three times the value of the excisable goods in respect of which any contravention of the nature referred to in clause (a) or clause (b) or clause (bb) or clause (bbb) or clause (c) .....

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Q of the Rules, 1944 is imposable / leviable on the manufacturer, producer, registered person of a warehouse or a registered dealer. Therefore, in a given case the penalty under Section 11AC of the Act, 1944 as well as under Rule 173Q of the Rules, 1944 i.e. under both the provisions shall be leviable / imposable. In a given case it may happen that the penalty under Section 11AC of the Act, 1944 may not be leviable / imposable if the concerned person is not found liable to pay duty as determined .....

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section 11AC of the Act, 1944 and if it is found that it is not possible to bifurcate the penalty imposable under Section 11AC of the Act, 1944 and Rule 173Q of the Rules, 1944 and/or it is not possible to apportion quantum of penalty imposable under Rule 173Q of the Rules, 1944 and/or section 11AC of the Act, 1944, in such a case the matter may be remanded to the appropriate Adjudicating Authority to redetermine the quantum of penalty either under Rule 173Q of the Rules, 1944 and/or section 11 .....

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under Section 11AC of the Act, 1944. Therefore, the proper remedy in such a case would be to remand the matter to the Adjudicating Authority to determine the amount of penalty and/or to determine quantum of penalty either under Rule 173Q of the Rules, 1944, in case the concerned person is manufacturer, producer, registered person of a warehouse or the registered dealer and if it is found that the said person is a person who is not liable to pay the duty as determined under subsection (2) of sec .....

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ter to the Collector to redetermine the quantum of penalty after determining the issue on licensing aspect. In the case before the Hon ble Supreme Court it was specifically found that it was not possible to appreciate the quantum of penalty between the contraventions found and therefore, the Hon ble Supreme Court though upheld the Collector s findings on the issue of declaration and evasion, remanded the matter to the Collector to redetermine the quantum of penalty after determining the issue on .....

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