TMI Blog2019 (2) TMI 1020X X X X Extracts X X X X X X X X Extracts X X X X ..... to be justified. The appellants were issuing the invoices and collecting the duty from their customers but not depositing the same with the revenue by the due date. This itself shows the malafide intention of the appellants. Benefit of reduced penalty - Held that:- Since in the present case the order is dated 18.08. 2010 and has been received by the Appellants on 27.08.2010 and appellants have deposited the 25% of penalty before filing of the appeal on 18.08.2010. Adjudicating authority should have extended the benefit of payment of penalty of 25% of duty demanded in his order as per the first proviso to section 11AC. Since the appellant has made payments as per the proviso to the section 11AC the benefit of proviso should have been allowed to them. Appeal allowed in part. - APPEAL No. E/1971/2010 - A/88306/2018 - Dated:- 26-11-2018 - Dr. D.M. Misra, Member (Judicial) And Mr. Sanjiv Srivastava, Member (Technical) Shri Rajesh Ostwal, Advocate, for appellant Shri Ajay Kumar, Additional Commissioner (AR), for respondent ORDER Per: Sanjiv Srivastava The appeal is directed against the Order in Original No 08/Commr (KAP)/ LTU/ 2010 dated 19.08.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ghteen Lakhs Sixty Seven Thousand Three Hundred and Fifty Three) paid by the assessee, against the amount confirmed in (ix) above. xi. I also confirm and appropriate the amount of ₹ 9,95,941.00 (Rs. Nine Lakhs Ninety Five Thousand Nine Hundred and Forty One) separately paid by the assessee against interest payable under Section 11AB of the Central Excise Act, 1944. xii. I also impose a penalty of ₹ 18,67,353.00 (Rs. Eighteen Lakhs Sixty Seven Thousand Three Hundred and Fifty Three) on the assessee, under Rule 25 of the Central Excise Rules 2002 read with Section 11AC of the Central Excise Act, 1944. xiii. I confirm the demand of ₹ 49,76,844.00 (Rs. Forty Nine Lakhs Seventy Six Thousand Eight Hundred and Forty Four) and Cess amounting to ₹ 63,329.00 (Rs. Sixty Three Thousand Three Hundred and Twenty Nine) for the period April 2004 to March 2005 (clearances of semi-finished goods from Unit 1 to 2) under Section 11A (2) of the Central Excise Act, 1944. xiv. I appropriate the amount of ₹ 49,76,844.00 (Rs. Forty Nine Lakhs Seventy Six Thousand Eight Hundred and Forty Four) and Cess amounting to ₹ 63,329.00 (Rs. Sixty Three Thou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Section 11AB of the Central Excise Act, 1944. xxiv. I also impose a penalty of ₹ 9,02,463.00 (Rs. Nine Lakhs Two Thousand Four Hundred and Sixty Three only) on the assessee, under Rule 25 of the Central Excise Rules 2002 read with Section 11AC of the Central Excise Act, 1944. xxv. I confirm the demand of ₹ 1,79,64,520.00 (Rs. One Crore Seventy Nine Lakhs Sixty Four Thousand Five Hundred and Twenty only) and Cess amounting to ₹ 3,33,592.00 (Rs. Three Lakhs Thirty Three Thousand Five Hundred and Ninety Two only) for the period April 2004 to March 2005 (clearances of goods from Unit No.2) under Section 11A(2) of the Central Excise Act, 1944. xxvi. I appropriate the amount of ₹ 1,79,64,520.00 (Rs. One Crore Seventy Nine Lakhs Sixty Four Thousand Five Hundred and Twenty only) and Cess amounting to ₹ 3,33,592.00 (Rs. Three Lakhs Thirty Three Thousand Five Hundred and Ninety Two only) paid by the assessee, against the amount confirmed in (xxix) above. xxvii. I also confirm and appropriate the amount of ₹ 39,48,615.00 (Rs. Thirty Nine Lakhs forty Eight Thousand Six Hundred and Fifteen only) separately paid by the assessee aga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gainst interest payable under Section 11AB of the Central Excise Act, 1944. xxxvi. I drop further proceedings with reference to recovery of a sum of ₹ 33,27,780.00 (Rs. Thirty Three Lakhs Twenty Seven Thousand Seven Hundred Eighty only) and cess amounting to ₹ 57,209.00 (Rs. Fifty Seven Thousand Two Hundred and Nine only) for the period 2003-04, 2004-05 and 2005-06 (towards CENVAT credit wrongly availed by Unit No.1) as referred to in Para 28 to the Show Cause Notice and the consequential demands with reference to Para 28(F) of the Notice. Consequently invoking Rule 13 and Rule 3(4) of the CENVAT Credit Rules, 2002 will not apply. xxxvii. Penal proceedings against Shri C.G. Ramkrishnan, Director COO are dropped. 2.1 Appellants are having two units designated as Unit 1 (Plot No E-1/2/3, MIDC Taloja) and Unit 2 (Plot No C-2, MIDC Taloja) wherein they are undertaking the manufacture of pre sensitized aluminum litho plates, offset printing chemicals and sensitized/ lacquered films falling under Chapter 84, 37, 38 and 39 of the Central Excise Tariff Act, 1985. 2.2 One of the final products manufactured by the appellants is lacquered polyester films, fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ave been initiated against the appellant by way of issuance of Show Cause Notice dated 26.02.2008 for confirmation of the demand of duty short paid by invoking proviso to Section 11A(1) of the Central Excise Act, 1944, demand interest on the duty short paid under Section 11AB of the Central Excise Act, 1944, Impose penalty under Rule 25 of Central Excise Rules, 2002 read with Section 11AC of Central Excise Act, 1944. Impose penalty under rule 13 of the CENVAT Credit Rules, 2002. 2.9 The show cause notice was adjudicated by the Commissioner as per the order referred in para 1, supra. 2.10 Aggrieved by imposition of penalty appellants are in appeal before us. 3.1 We have heard Shri Rajesh Ostwal Advocate on the behalf of Appellant and Shri Ajay Kumar additional Commissioner (Authorized Representative0 on behalf of revenue. 3.2 Arguing on behalf of appellants learned advocate submitted - i. In case of transactions between Unit 1 and Unit 2, the issue was totally revenue neutral as to what so ever was the duty paid in one unit was available as CENVAT credit to the other unit. In case of SRF Ltd [2007 (220) ELT 201 (T)], it has been held by the tribunal t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, 1944 automatically comes into picture and demand is made in terms of that section, to recover the duty so short paid. In case the duty is paid after the relevant date the same gets adjusted by application of the section. 4.3 In the present case the period of demand is from April 2003 to November 2005 (Unit-1) and April 2003 to March 2006 (Unit-2). The argument about system glitch in SAP-ERP system of the Appellants for such a long period do not appear to be justified. The appellants were issuing the invoices and collecting the duty from their customers but not depositing the same with the revenue by the due date. This itself shows the malafide intention of the appellants. Further it should also be taken note of that against the duty shown on the invoice, the buyers of appellant were entitled to CENVAT credit. In this manner Appellants were passing on the CENVAT credit to their buyers without actually depositing the duty. 4.4 The argument of the Appellants to the effect that they had paid the duty prior to issuance of Show Cause Notice do not hold goods in view of the decision of Bombay High Court in case of Shri Ram Aluminium Pvt Ltd [2009 (242) ELT 202 (BOM)], Hon ble Hig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the first requirement is concerned and consequently the judgment of the Supreme Court cannot be held to have concluded the issue on there being a need for determination of duty under Section 11A(2). 7. We have heard learned Counsel. In so far as mandatory penalty is concerned, the law stands now concluded in Dharamendra Textile Processors (supra). The law as now settled is that there is no jurisdiction in the authority to impose penalty lesser than the mandatory penalty which has to be co-extensive with the duty which is payable. The Supreme Court has further held that there is no requirement of existence of mens rea. Mens rea as understood in criminal law is not an essential ingredient for holding a delinquent liable to pay penalty for a tax delinquency which is a Civil obligation, remedial and coercive in its nature, and is far different from the penalty for a crime or a fine or forfeiture provided as punishment for the violation of criminal or penal laws. 8. Having so said we may now consider the first limb of argument as raised by the learned Amicus Curiae. The relevant portion of Section 11A of Central Excise Act, 1944 reads as under :- 11A. Recovery of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... late Tribunal or, as the case may be, the court, then, for the purposes of this section, the duty has reduced or increased, as the case may be, shall be taken into account. 10. The Judgment in Dharamendra Textile Processors (supra) came up for consideration before the Supreme Court in Rajasthan Spinning Weaving Mills Ltd. (supra). It is necessary to reproduce paragraphs 2 and 15, which read as under :- 2. What are the conditions and the circumstances that would attract the imposition of penalty under Section 11AC of the Central Excise Act ( The Act hereinafter)? In the two cases before us the Tribunal has taken the view that there was no warrant for levy of penalty since the assessees had deposited the balance amount of excise duty (that was short paid at the first instance) even before the show cause notice was issued. On the other hand, on behalf of the Revenue, the appellants in the two appeals, it was contended, relying upon a recent decision of this Court in Union of India v. Dharamendra Textile Processors, 2008 (231) E.L.T. 3 (S.C.) that mere non payment or short payment of duty (without anything else) would inevitably lead to imposition of penalty equal to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Point B is said to pass sub silentio. 12. Can it be said that this issue was sub-silentio and not under consideration in Rajasthan Spinning Weaving Mills. In our opinion it is not possible to accept the said submission considering the last sentence of para.2 of the judgment which we again reproduce and which reads as under :- We completely fail to see how payment of the differential duty, whether before or after the show cause notice is issued, can after the liability for penalty, the conditions for which are clearly spelled out in Section 11AC of the Act. 13. It is, therefore, clear that though the Supreme Court has not expressly referred to the argument now advanced by the learned Amicus Curiae, nevertheless the Supreme Court was clear that to impose penalty the conditions in Section 11AC of the Act must be complied with. Under Section 11AC as already set out the requirements are firstly, that there must be intent to evade payment of duty and secondly the duty ought to be as determined under sub-section (2) of Section 11A. It is, therefore, clear that it is only on these two requirements being followed that penalty is imposable. The determination of duty a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods were removed by the assessee without payment of duty. Finally, by exercising the powers under Section 11AC, penalty was also imposed to the extent of equal amount of the duty which is 100% penalty. 3. Being aggrieved by the aforesaid order passed by the Commissioner of Customs and Central Excise, an appeal was filed before the Tribunal. Before the Tribunal, only one issue was raised by the respondent, which was with regard to the quantum of penalty under Section 11AC of the Central Excise Rules. No other issue was raised and, therefore, we are not required to go into any other aspect of the matter except for deciding as to whether or not the quantum of penalty imposed by the Tribunal is justified or not in the facts and circumstances of the present case. In this connection, we may appropriately refer to the decision of the Division Bench of this Court in Union of India v. Rajasthan Spinning and Weaving Mills and Commissioner of Customs and Central Excise v. Lanco Industries Ltd. reported in 2009 (13) SCC 448 = 2009 (238) E.L.T. 3 (S.C.). In the said judgment, scope and ambit of Section 11-AC was considered and decided by this Court. 4. The learned counsel appearing for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ara 5.3 stated that they have paid 25% of the penalty amount. In terms of Section 11AC as it existed during the relevant period read as follows: Section 11AC as amended by the Finance Act, 2000 with effect from 12th May, 2000. Section 11AC - Penalty for short-levy or non-levy of duty in certain cases - Where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reasons of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intention to evade payment of duty, the person who is liable to pay 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 shall be twentyfive per cent of the duty so determi ..... 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