2009 (5) TMI 686 - AT - Central Excise

Summary

Issues Involved:
1. Imposition of penalty under Section 11-AC of the Central Excise Act, 1944.
2. Demand for interest under Section 11-AB of the Central Excise Act, 1944.
3. Validity of the Commissioner (Appeals)' decision to set aside the penalty imposed by the Deputy Commissioner.

Issue-wise Detailed Analysis:

1. Imposition of Penalty under Section 11-AC of the Central Excise Act, 1944:

The core issue revolves around whether the imposition of penalty under Section 11-AC is mandatory when duty is short-paid but subsequently paid before the issuance of a show cause notice. The Tribunal examined the statutory language of Section 11-AC, which mandates that if any duty of excise has not been levied, paid, short-levied, or short-paid due to fraud, collusion, willful misstatement, suppression of facts, or contravention of the Act with intent to evade duty, the person liable must also pay a penalty equal to the duty determined. The Tribunal referred to the judgment in the case of Zunjarrao Bhikaji Nagarkar v. Union of India, which clarified that the imposition of penalty is not discretionary but obligatory once the conditions under Section 11-AC are met. The Tribunal also highlighted that the Punjab & Haryana High Court in Commissioner of Central Excise, Delhi-III v. Machino Montell (I) Ltd. held that mere deposit of duty before the issuance of a show cause notice does not exempt the assessee from penalty under Section 11-AC.

2. Demand for Interest under Section 11-AB of the Central Excise Act, 1944:

The Tribunal analyzed the statutory provisions under Section 11-AB, which stipulate that in addition to the duty, interest must be paid on delayed payments. The language used in Section 11-AB, "shall, in addition to duty, be liable to pay interest," indicates a mandatory obligation on the part of the assessee to pay interest on any short-levied or short-paid duty. The Tribunal emphasized that the obligation to pay interest is not negated by the payment of the duty amount before the issuance of a show cause notice.

3. Validity of the Commissioner (Appeals)' Decision:

The Tribunal scrutinized the Commissioner (Appeals)' decision which relied on the Tribunal's earlier decision in CCE, Delhi-III (Gurgaon) v. Machino Montell (I) Ltd., to set aside the penalty imposed by the Deputy Commissioner. The Tribunal noted that the decision in Machino Montell (I) Ltd. had been overturned by the Punjab & Haryana High Court, which clarified that the mere payment of duty before the issuance of a show cause notice does not absolve the assessee from the liability of penalty. The Tribunal observed that the Commissioner (Appeals) failed to conduct a factual analysis to determine if the situation under Section 11-AC existed in this case. The Tribunal concluded that the matter must be remanded to the adjudicating authority to reassess the liability for penalty and interest, taking into account the factual matrix and statutory mandates.

Conclusion:

The Tribunal remanded the matter to the adjudicating authority to decide on the liability of the respondents for penalty and interest, emphasizing the need for a detailed factual analysis to determine if the conditions under Section 11-AC were met. The adjudicating authority was directed to dispose of the matter by 31st December 2009, ensuring adherence to the statutory provisions and judicial precedents discussed.