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M/s K.A. Forward Shoe Factory Versus Asstt. Commissioner, Central Excise And Another

2017 (8) TMI 106 - ALLAHABAD HIGH COURT

Penalty - Shortage of inputs - Jurisdiction - Whether the CESTAT was justified in imposing penalty u/s 11AC of the Act, ignoring the fact that the Appellant has voluntarily paid the amount of duty equivalent to cenvat credit availed on the shortage of inputs as such issuance of show cause notice itself is without jurisdiction in view Section 11A(2B) of the Central Excise Act, 1944? - Held that: - the excise duty not levied or paid or short-levied or short-paid or which is erroneously refunded if .....

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ise duty and the payment thereof. This is also clear from the language of Sub-Section (1) of Section 11A of the Act which requires issuance of show cause notice in respect of the excise duty only - Section 11A of the Act has no application in respect of realisation of penalty if any imposed under Section 11AC of the Act - the imposition of penalty under Section 11AC of the Act is justified even though the duty of excise has been paid voluntarily by the assessee and the notice issued for imposing .....

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A, 1944? - Held that: - There is no provision under the Act which places any obligation upon the adjudicating authority to first determine the penalty equal to 25% of the excise duty not levied or short levied or erroneously refunded and in the event it is not paid within 30 days to proceed to levy penalty of 100% of the deficient excise duty - There is no dispute that the assessee had deposited the duty determined and the interest even prior to determination of it by the Central Excise Officer .....

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the penalty - The determination of duty and penalty by itself is sufficient on part of the Central Excise Officer. It is then upon the assessee to pay 25% of the penalty within the stipulated period of 30 days to avail the benefit of the reduced penalty or to pay the whole of it. - The benefit of reduced penalty of 25% is available to the assessee only on depositing the deficiency in duty determined with interest but also 25% of the duty determined by way of penalty within the stipulated per .....

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al, Krishna Agarawal For the Respondent : Sr.S.C., Ashok Singh,Krishna Agarawal ORDER The assessee M/s K.A. Forward Shoe Factory, Agra has preferred this appeal under Section 35G of the Central Excise Act, 1944 (hereinafter referred to as the Act) against the order dated 09.09.2010 of the Central Excise & Service Tax Appellate Tribunal (In short CESTAT). The assessee is a company engaged in the manufacturing of shoes which are excisable goods. During inspection of the factory premises of the .....

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order in original dated 03.09.2007. The demand of excise duty of ₹ 3,29,192/- was confirmed but as the said amount had already been deposited it was directed to be appropriated towards the demand. At the same time an equal amount of penalty of ₹ 3,29,192/- was imposed under Section 11AC of the Act read with Rule 25 of the Central Excise Rules. The appeal of the assessee to the Commissioner (Appeals) was dismissed on 05.11.2007 and so was the appeal preferred before the CESTAT vide t .....

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n in view Section 11A(2B) of the Central Excise Act, 1944. b) Whether in the alternative, the CESTAT was justified in not considering that duty was paid much prior to the passing of the order by the adjudicating authority, as such there was no justification for imposing 100% penalty and at the most 25% penalty may have been imposed in view of the proviso to the Section 11AC of the Central Excise Act, 1944." We have heard Sri Suyash Agarwal and Sri Krishna Agarwal learned counsel for the par .....

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it meaning thereby that no penalty could have been levied upon it under Section 11AC of the Act. The relevant portion of Section 11A(1) and 11A (2B) of the Act as it stood at the relevant time are quoted below:- "11A. Recovery of duties not levied or not paid or short-levied or short-paid or erroneously refunded-(1)When any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, whether or not such non-levy or non-payment, short-levy or sh .....

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him to show cause why he should not pay the amount specified in the notice." Provided................ "(2B) Where any duty or excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded, the person, chargeable with the duty, may pay the amount of duty on the basis of his own ascertainment of such duty or on the basis of duty ascertained by a Central Excise Officer before service of notice on him under sub-section(1) in respect of the duty, and inf .....

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to show cause why he should not pay the amount of duty specified in the notice. It means that the notice referred to is in respect of realisation of the excise duty only and not the penalty. Sub-Section (2B) of Section 11A of the Act provides that in cases where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded the person chargeable with the duty if pays the duty on the basis of his own ascertainment or on the basis of the adjudication .....

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11A of the Act, the Central Excise Officer on receiving information of the said deposit shall not issue any show-cause notice as contemplated by Sub-Section (1) of Section 11A of the Act. The use of the expressions " in respect of the duty" and "in respect of the duty so paid" in Sub-Section (2B) of Section 11A of the Act clearly establishes that it refers to the notice for the purposes of realisation of the excise duty and the payment thereof. This is also clear from the lan .....

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tified even though the duty of excise has been paid voluntarily by the assessee and the notice issued for imposing penalty was neither without jurisdiction or in violation of Section 11A(2B) of the Act which in fact was not applicable. The other question of law before us is about the quantum of the penalty whether it has to be 25% of the shortage of excise duty paid and determined or equal to the amount of the shortage of excise duty. The argument of Sri Suyash Agarwal in this regard is that as .....

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Krishna Agarwal, had submitted that the above decision of the Delhi High Court has been distinguished by the Delhi High Court itself as well as by the Bombay High Court. There is no provision under the Act which places any obligation upon the adjudicating authority to first determine the penalty equal to 25% of the excise duty not levied or short levied or erroneously refunded and in the event it is not paid within 30 days to proceed to levy penalty of 100% of the deficient excise duty. Section .....

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duty as determined under sub-section (2) of section 11A, shall also be liable to pay a penalty equal to the duty so determined. Provided that where such duty as determined under sub-section(2) of section 11A, and the interest payable thereon under section 11AB, is paid within thirty days from the date of communication of the order of the Central Excise Officer determining such duty, the amount of penalty liable to be paid by such person under this section be twenty-five per cent of the duty so .....

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y duty has not paid the duty levied or has short-paid the same or has been refunded any duty erroneously for any of the reasons specified therein with the intention to evade payment of duty. The penalty leviable under Section 11AC of the Act is mandatory and not discretionary as has been held by the Apex Court in the case of Union of India Vs. Rajasthan Spinning and Weaving Mills 2009 (238) E.L.T. 3 (S.C.). The Apex Court in the aforesaid case has laid down that once it is held that Section 11AC .....

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ore the issuance of the notice nonetheless there was no default in its timely payment and was paid only after the shortage was detected. Therefore, ex facie there was contravention of the provisions of the Act in the payment of duty which was held to be with the intent to evade duty so as to attract Section 11AC of the Act. Therefore, once Section 11AC of the Act was attracted, a penalty equal to the amount of the duty evaded as determined was payable. The first proviso to Section 11AC of the Ac .....

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lays down that the benefit of the above reduced penalty is admissible only if the amount of penalty so determined is also paid within 30 days of the communication of the order of the Central Excise Officer determining the duty. In other words, the aforesaid rebate in penalty is admissible on the deposit of not only the excise duty determined and the interest thereon but also 25% of the penalty so imposed within a period of 30 days of the service of the order. There is no dispute that the assess .....

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unt by way of penalty only if it had given an option to the assessee to pay 25% of the duty amount by way of penalty and since this was not done the authority was in error in demanding 100% of the duty by way of penalty was clearly distinguished by the Division Bench of the Bombay High Court in Commissioner of Central Excise, Raigad Vs. Castrol India Ltd. 2012(286) E.L.T. 194 (Bom.). This was an identical case as we are dealing with regarding imposition of penalty under Section 11AC of the Act a .....

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r with interest is paid within 30 days from the date of communication of the order of the Central Excise Officer determining the duty, the penalty payable shall be 25% of the duty so determined provided further that the reduced penalty of 25% of the duty determined is also paid within 30 days of the communication of the order. The aforesaid decision in other words laid down that if the duty determined, interest and 25% of the penalty amount is deposited within 30 days of the communication of the .....

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aid within the stipulated time then the penalty payable would be 25% of the penalty imposed subject to the condition that the said 25% of the penalty is also paid within the stipulated period. Section 11AC of the Act neither requires the Central Excise Officer to determine the quantum of penalty to be 25% of the duty nor it require the Central Excise Officer to communicate the option available to the assessee under Section 11AC of the Act with regard to payment of 25% of the penalty. The determi .....

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