2009 (8) TMI 1173 - AT - Central Excise

Summary

Issues:
Quantum of penalty when duty and penalty paid before show cause notice issuance.

Analysis:
The appellant appealed against an order imposing 100% penalties even though they had already reversed the Cenvat Credit and paid interest. The primary issue was determining the quantum of penalty when duty and penalty were paid before the issuance of a show cause notice. The appellant argued that penalties should be reduced to 25% of the duty demand if duty and interest were paid within 30 days of the demand determination, citing relevant case laws. On the contrary, the Revenue contended that penalties under Section 11AC cannot be reduced, referencing a specific case law.

The Tribunal examined Section 11AC of the Central Excise Act, which outlines penalties for non-payment of duty due to various reasons. The section provides for reducing penalties to 25% of the duty amount if duty and interest are paid within 30 days of the order communication. The purpose is to provide a benefit to the assessee for prompt payment. In this case, since the appellant had reversed the Cenvat credit and paid interest before the show cause notice, they were entitled to a reduced penalty of 25% of the duty amount.

After considering the facts, the Tribunal concluded that the appellant had already taken corrective actions by reversing the Cenvat credit and paying interest before the show cause notice. Therefore, the penalty under Section 11AC was restricted to 25% of the duty amount. The appellant was directed to deposit the reduced penalty within 30 days, failing which the full penalty amount would be payable. Consequently, the appeal was disposed of with the decision pronounced on a specific date.