2010 (1) TMI 1071 - AT - Central Excise

Summary

Issues:
Imposition of penalty under Section 11AC of the Central Excise Act.

Detailed Analysis:

Issue 1: Imposition of Penalty
The appeal was filed by the department seeking to impose a penalty on the respondent under Section 11AC of the Central Excise Act. The original authority refrained from imposing the penalty despite confirming the demand of duty against the respondent for certain goods clandestinely removed during the disputed period. The Commissioner (Appeals) upheld this decision, stating that no penalty was applicable as the duty had been paid before the issuance of the show-cause notice. The appellate authority, following a Tribunal decision, also held that penalty under Section 11AC was not imposable in such a scenario. The appellant argued that the respondent contravened provisions of the Act with intent to evade duty, and thus, Section 11AC was mandatory. The respondent claimed the mistake was unintentional and rectified promptly upon detection by the authorities.

Issue 2: Legal Position
Upon careful consideration, the judge found that the respondent did contravene the law by clearing dutiable goods without proper documentation and payment of duty, which was rectified only upon the department's intervention. The evasion of duty was acknowledged by both lower authorities and not contested by the respondent. The judge cited Supreme Court and High Court rulings emphasizing that penalty under Section 11AC is mandatory in cases of contravention with intent to evade duty, regardless of duty payment timing. The legal position was clarified in previous judgments, highlighting the necessity of duty determination and intent to evade payment for penalty imposition. The lower authorities' decision to not invoke Section 11AC due to pre-show-cause notice duty payment was deemed unsustainable in light of established legal precedents.

Final Decision:
The judge set aside the impugned order, allowing the appeal and disposing of the cross objections. The ruling emphasized the mandatory nature of penalty under Section 11AC in cases of contravention with intent to evade duty, irrespective of the timing of duty payment.