2007 (11) TMI 511 - AT - Central Excise

Summary

Issues:
Reduction of penalty imposed on M/s. Murugan Textiles, whether penalty under Section 11AC is mandatory, conflicting judgments on penalty imposition, applicability of penalty if duty is paid before Show Cause Notice.

Analysis:
The case involved two appeals by M/s. Murugan Textiles and the Revenue against a common order where the penalty imposed on M/s. Murugan Textiles was reduced from Rs. 4,17,000 to Rs. 1,25,000 by the Commissioner (Appeals). The main contention was whether the penalty under Section 11AC was mandatory and if it should be imposed even if duty was paid before the Show Cause Notice.

The assessee argued that due to confusion in the textile industry regarding excise duty, they resorted to evasion but paid the duty and interest before the Show Cause Notice. They cited a judgment where penalty was not imposed in a similar situation. However, the Revenue contended that in cases of duty evasion, imposition of an equal amount of penalty was justified under Section 11AC.

Conflicting judgments from various High Courts were presented regarding the imposition of penalty under Section 11AC. Some held that penalty was mandatory even if duty was paid before the Show Cause Notice, while others suggested otherwise. The Tribunal referred to different cases to support both viewpoints.

The Tribunal acknowledged the confusion in the textile industry due to the introduction of Central Excise levy and the leniency shown by the department towards procedural lapses. However, it held that M/s. Murugan Textiles, who manipulated documents to evade duty, could not escape penalty under Section 11AC. Yet, considering the overall circumstances, including payment of duty before the notice, the modified penalty imposed by the Commissioner (Appeals) was deemed fair and justified. Therefore, the impugned order was upheld, and the appeals by both parties were dismissed.