2009 (5) TMI 691 - AT - Central Excise

Summary

Issues involved: Reduction of penalty under Section 11AC of CEA, 1944 and violation of principles of natural justice in issuing show cause notice.

The Revenue appealed against the Commissioner (Appeals) decision to reduce the penalty to 25% of the duty amount u/s 11AC of CEA, 1944, citing the case of CCE v. Malbro Appliances. The Revenue argued that as per the decision in the case of M/s. Dharmendra Textile Processors, penalty u/s 11AC is mandatory and should not be reduced unless duty, interest, and penalty are paid before the show cause notice or within a month of the order-in-original confirming the demand. Various tribunal and court decisions were also referenced by the Revenue to support their stance.

The Respondents filed a cross objection stating that the show cause notice lacked evidence and requested documents were not provided, thus violating principles of natural justice.

The Tribunal acknowledged the mandatory nature of penalty u/s 11AC as upheld by the Supreme Court but noted that the circumstances for reducing the penalty to 25% were not addressed. Referring to the case of M/s. K.P. Pouches (P) Ltd. v. UOI, it was held that if duty was paid before the show cause notice and the original adjudicating authority did not explain the provisions of Section 11AC in the order, the benefit of 25% penalty payment at the appellate stage is permissible. Consequently, the Tribunal upheld the decision of the Commissioner (Appeals) based on the above reasoning.

Decision: The appeal filed by the Revenue was rejected, and the decision was pronounced on 29-5-2009.