2008 (1) TMI 800 - AT - Central Excise

Summary

Issues:
1. Imposition of penalty under Section 11AC of the Central Excise Act, 1944.
2. Whether non-payment of duty was due to fraud, collusion, willful mis-statement, or suppression of facts.
3. Discretionary power of the authority in imposing penalty under Section 11AC.

Issue 1: Imposition of penalty under Section 11AC of the Central Excise Act, 1944:
The Tribunal initially set aside the penalty imposed under Section 11AC as the duty was deposited before the show cause notice was issued. However, the Hon'ble High Court of Punjab & Haryana overturned this decision, emphasizing that the mere deposit of duty before the notice does not automatically negate the penalty. The High Court highlighted that the key consideration is whether the non-payment of duty was due to fraud, collusion, willful mis-statement, or suppression of facts to evade duty payment, as outlined in Section 11AC. The matter was remanded back to the Tribunal for a fresh decision.

Issue 2: Whether non-payment of duty was due to fraud, collusion, willful mis-statement, or suppression of facts:
The appellant, a new licensee, failed to pay duty on Chenile fabrics for a specific period under the belief that no duty was applicable. The appellant contended that they promptly paid duty with interest upon detection by officers, citing a similar case where penalty was waived. The Revenue argued that the non-payment was intentional suppression to evade duty. The Tribunal found that the appellant did not pay duty on a bona fide belief, ruling it as a clear case of suppression with intent to evade payment of duty, warranting the invocation of Section 11AC.

Issue 3: Discretionary power of the authority in imposing penalty under Section 11AC:
The Tribunal acknowledged that imposing a penalty under Section 11AC is a discretionary power of the authority. Citing a previous case, the Tribunal reduced the penalty to 25% of the duty amount, amounting to Rs. 1,27,000, as the duty was paid before the issuance of the show cause notice. This decision aligned with the precedent set by the Hon'ble High Court, leading to the disposal of the appeal.

In conclusion, the judgment delves into the nuances of imposing penalties under Section 11AC of the Central Excise Act, emphasizing the importance of intent and the discretionary power of the authority. The case highlights the significance of timely duty payment and the consequences of suppression of facts in evading duty obligations.