2006 (7) TMI 504 - AT - Central Excise

Summary

Issues:
Non-imposition of penalty under Section 11AC by the Commissioner on the respondents despite invoking the proviso to Section 11A(1) of the Central Excise Act. Applicability of penalty under Section 11AC in cases involving interpretation of exemption Notifications. Imposition of penalties under Rule 173Q of the Central Excise Act, 1944. Allowance of abatement of duty from sale price under Section 4(4)(d)(ii) of the Central Excise Act. Dismissal of review petition by the Supreme Court regarding the benefit of Section 4(4)(d)(ii) of the Act.

Analysis:
The appeals before the Appellate Tribunal CESTAT, Chennai involved the Department's challenge against the Commissioner's decision of not imposing penalties under Section 11AC of the Central Excise Act on the respondents despite confirming demands of duty against them under the proviso to Section 11A(1). The Commissioner refrained from imposing penalties under Section 11AC, citing reasons that the respondents were not well-versed with statutory provisions and that the case required interpretation of exemption Notifications and legal provisions. The Department contended that when the proviso to Section 11A(1) is invoked for demanding duty, a penalty under Section 11AC becomes mandatory. Additionally, the Department raised concerns regarding the allowance of abatement of duty from sale price under Section 4(4)(d)(ii) of the Act, citing a review petition filed against a Supreme Court judgment. The respondents argued that penalties under Section 11AC should not be imposed in cases involving interpretation of Notifications, citing relevant precedents.

Upon thorough consideration, the Tribunal found that the demands of duty under the proviso to Section 11A(1) were valid and confirmed, making the penalty under Section 11AC mandatory. While acknowledging the discretion of quasi-judicial authorities in determining the quantum of penalty, the Tribunal observed that penalties should not be dropped based on considerations related to interpretation of provisions, as they are relevant for determining the quantum of penalty. In this case, moderate penalties were imposed on the respondents considering their status as SSI Units and the involvement of exemption Notifications in the case. The Tribunal also noted the dismissal of the Department's review petition by the Supreme Court regarding the benefit of Section 4(4)(d)(ii) of the Act, upholding the Commissioner's decision to allow this relief to the assessee.

In conclusion, the Tribunal modified the impugned orders to impose penalties under Section 11AC on the respondents, along with interest under Section 11AB, while upholding the allowance of abatement of duty from sale price. The appeals were disposed of accordingly.