2004 (1) TMI 408 - AT - Central Excise

Summary

Issues:
Controversy over setting aside penalty under Rule 26 read with Section 11AC of the Central Excise Act based on duty payment before show cause notice.

Analysis:
The appeal was filed by the Revenue challenging the Commissioner (Appeals) decision to set aside the penalty on the respondents under Rule 26 read with Section 11AC of the Central Excise Act. The main issue revolved around whether the penalty could be nullified simply because the respondents had deposited the duty before the issuance of the show cause notice. The Revenue argued that the duty payment was not voluntary but was demanded by the Department after detecting non-compliance by the respondents. The adjudicating authority and the Revenue contended that penalties should not be set aside based on the grounds of duty payment before the show cause notice, citing legal precedents. On the other hand, the respondents' Counsel defended the impugned order, stating that the penalty on the Director had already been imposed, and the penalty on the company was unwarranted under Rule 26 and Section 11AC.

Upon review, the Tribunal found that the respondents were engaged in manufacturing and were liable to discharge additional duty, which they failed to pay before the show cause notice was issued. Despite earlier show cause notices and contestations, the respondents did not voluntarily pay the duty. The Tribunal emphasized that ignorance of the law is not an excuse for evading duty payment. The Commissioner (Appeals) had set aside the penalty without considering the circumstances where the respondents only paid the duty when left with no other choice after Departmental action. The Tribunal opined that the legal precedents cited by the Commissioner (Appeals) were not directly applicable to the case. The Tribunal noted that the Commissioner (Appeals) upheld confiscation of goods and penalty on the Director, making it legally inconsistent to quash the penalty on the company. Thus, the penalty under Rule 26 read with Section 11AC was deemed applicable to the respondents.

Considering the circumstances and the fact that duty was already paid, the Tribunal reduced the penalty from Rs. 50,000 to Rs. 10,000. The Tribunal acknowledged the respondents' conduct and ignorance but upheld the penalty to maintain legal consistency. Consequently, the impugned order of the Commissioner (Appeals) regarding the penalty on the respondent-company was modified, and the appeal of the Revenue was disposed of accordingly.