2006 (2) TMI 446 - AT - Central Excise

Summary

Issues:
1. Imposition of penalties under Section 11AC and Rule 57-I read with Section 11 AC.
2. Levying interest under Section 11AB despite payment of entire duty prior to the show-cause notice.
3. Interpretation of Section 11AC regarding penalty imposition in case of voluntary vs. involuntary payment of duty.

Analysis:
1. The original authority imposed penalties on the assessee under Section 11AC and Rule 57-I read with Section 11 AC, along with interest under Section 11AB, despite the assessee paying the entire duty before the show-cause notice was issued. The Commissioner (Appeals) allowed the assessee's appeal, leading to the Revenue's present appeal challenging the order.

2. The main issue for consideration was whether penalties under Section 11AC and interest under Section 11AB were applicable despite the duty being paid in full before the show-cause notice. The Revenue argued affirmatively citing various decisions, while the respondent urged a negative answer based on different case laws.

3. The Tribunal analyzed the conflicting decisions and concluded that penalties under Section 11AC should not be imposed when duty is paid before the show-cause notice, as established in the case law of Rashtriya Ispat Nigam Ltd. v. CCE, Visakhapatnam. The Tribunal also referred to the Karnataka High Court's decision in CCE, Mangalore v. Shree Krishna Pipe Industries, supporting no penalty imposition under Section 11AC in such cases. The Tribunal rejected the argument that payment after detection of duty evasion was involuntary, emphasizing that the law does not link involuntary payment with Section 11AC.

4. The Tribunal distinguished the cases cited by the Revenue, finding no support for penalty imposition in the cited judgments. It highlighted that the circumstances specified in Section 11AC for penalty imposition involve elements like fraud, collusion, or suppression, which are absent in cases of involuntary duty payment. The Tribunal deemed the Revenue's argument as per incuriam, including the case of CCE v. Sai Machine Tools Ltd.

5. Consequently, the Tribunal upheld the order vacating the penalties and interest, dismissing the Revenue's appeal. The decision was based on the legal interpretation that penalties under Section 11AC should not apply when duty is paid before the issuance of a show-cause notice, in alignment with established case laws and the absence of elements warranting penalty imposition as per Section 11AC.