2007 (3) TMI 498 - AT - Central Excise

Summary

Issues involved:
1. Imposition of penalty under Section 11AC when duty is paid before the issuance of show cause notice.

Analysis:
The judgment deals with the issue of whether the penalty under Section 11AC should be imposed when duty has been paid before the issuance of the show cause notice. The Tribunal noted that in cases involving clandestine activities, the penalty is usually imposable, but in the present cases, the penalty was not imposed by the Commissioner (Appeals) because the duty had been paid before the show cause notice was issued. The Tribunal referred to a Larger Bench decision in the case of CCE, Delhi-III v. Machino Montell (I) Ltd., which stated that in such circumstances, the penalty should not be imposed.

The Tribunal observed that there were conflicting views on this issue. The Departmental Representative pointed out that the Larger Bench decision in the case of Machino Montel (India) Ltd. had been reversed by the Punjab and Haryana High Court. However, the Tribunal decision in the case of Rashtriya Ispat Nigam Ltd. had been confirmed by the Supreme Court. The Department argued that the dismissal of an appeal by the Supreme Court did not amount to a declaration of law, and the Punjab and Haryana High Court had considered all relevant decisions and reversed the Larger Bench decision.

Various High Court decisions were cited, such as the case of Commissioner of Central Excise v. Shree Krishna Pipe Industries, where it was held that no question of law arises if duty is paid before the show cause notice. Similarly, in other cases like CCE, Madras v. Jkon Engineering (P) Ltd. and Commissioner of Central Excise v. Gaurav Mercantile Ltd., it was held that no penalty should be imposed when duty is paid before the issuance of the show cause notice. The High Courts also considered the Tribunal's decision in the case of Rashtriya Ispat Nigam Ltd., which was dismissed by the Apex Court, indicating acceptance of the Tribunal's view.

Due to the conflicting views and the importance of resolving the issue, the Tribunal decided to refer the matter to a Larger Bench for clarification. The Tribunal noted the confusion surrounding the imposition of penalties in cases of clandestine removals where duty had been paid before the show cause notice. The Tribunal highlighted the need for consistency in applying the law across different regions to avoid disparate treatment based on the location of the assessee. The matter was referred to the Hon'ble President for the constitution of a Larger Bench for further deliberation.