2006 (5) TMI 329 - AT - Central Excise

Summary

Issues:
Whether penalty can be imposed if duty has been paid before the issue of a show cause notice.

Analysis:
The appeal revolved around the question of whether a penalty can be imposed if duty has been paid before the issuance of a show cause notice. The learned JDR argued that in the present case, the duty was deposited only after detection by the Department, contending that it cannot be considered a voluntary deposit, making the penalty leviable under Section 11AB and Section 11AC. Reference was made to the Tribunal decision in the case of Commissioner of Central Excise, Indore v. Deepak Spinners Ltd., where it was held that the deposit of duty upon being caught by the Department does not qualify as a voluntary payment, justifying the imposition of a penalty and interest. The JDR also distinguished the Tribunal decision in the case of Rashtriya Ispat Nigam Ltd., relied upon by the Commissioner (Appeals), and cited the CESTAT decision in the case of Commissioner of Central Excise, Indore v. Jamna Auto Industries Ltd., emphasizing the imposition of penalties for contraventions of Central Excise provisions even if duty is paid before the issuance of a show cause notice.

The presiding authority noted the arguments presented and referred to the decisions by the Larger Bench in the case of C.C.E., Delhi v. Machino Montell and the Bombay High Court in the case of C.C.E. v. Gaurav Mercantile Ltd. Both decisions concluded that if duty is deposited before the issuance of a show cause notice, no penalty can be imposed under Section 11AC, nor can any interest be demanded under Section 11AB. The Tribunal's decision highlighted by the JDR attempted to draw a distinction between duty deposits made after detection by the department and those made voluntarily. However, it was emphasized that penalties under Section 11AC and 173Q are applicable only in cases of intentional duty evasion, which is typically detected by the department. Therefore, the view that penalties can be imposed even if duty is paid before the issuance of a show cause notice would render the decisions of the Bombay High Court and the Larger Bench redundant. Given the precedence of decisions by higher authorities, such as the Bombay High Court and the Larger Bench, over the JDR's cited decision, the presiding authority found no merit in the department's appeal and consequently rejected it.