2007 (12) TMI 393 - AT - Central Excise

Summary

Issues:
1. Whether penalty is imposable for removing excisable goods without payment of duty.
2. Applicability of Section 11AC of the Central Excise Act, 1944, versus Rule 173Q of the Central Excise Rules, 1944.
3. Consideration of mitigating factors for imposing a lower penalty.

Analysis:

Issue 1: The main issue in this case was whether penalty is imposable for removing excisable goods without payment of duty. The respondents had removed goods without paying duty initially but later paid the duty along with interest due to financial difficulties. The Consultant for the respondents argued that penalty should not be imposed as the duty was paid voluntarily before any show cause notice was issued. The Department, represented by the learned S.D.R., contended that penalty equal to duty is leviable in such cases. The Tribunal emphasized that all assessees are required to discharge their duty-burden as per the law and non-payment of duty leads to penal action to deter such behavior.

Issue 2: Another aspect of the case involved the applicability of Section 11AC of the Central Excise Act, 1944, in comparison to Rule 173Q of the Central Excise Rules, 1944. The Department argued that the penalty was imposed under Rule 173Q, while the respondents cited case laws related to Section 11AC. The Tribunal clarified that under the Excise Law, adherence to rules and timely payment of duty are crucial to maintain tax administration orderliness. It highlighted that non-payment of duty in the prescribed manner necessitates penal action to prevent chaos in tax collection.

Issue 3: The Tribunal considered mitigating factors for imposing a lower penalty despite the duty being paid late. While acknowledging that the respondents had paid the duty along with interest before any show cause notice, the Tribunal recognized this as a mitigating factor for imposing a lower penalty. It noted that the late payment of duty had been partly neutralized by the payment of interest. Consequently, the Tribunal modified the lower Appellate Authority's order and imposed a penalty of Rs. 6,000 considering the duty amount of Rs. 58,220.

In conclusion, the Tribunal allowed the Department's appeal, emphasizing the importance of adhering to tax laws and timely payment of duties to prevent disruptions in tax administration and ensure a regulated system. The judgment balanced the mitigating circumstances with the need for penalties to deter non-compliance, ultimately imposing a reduced penalty in consideration of the circumstances of the case.