9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2009 (8) TMI 1057 - HC - Central ExciseWhether mandatory penalty under Section 11AC can be imposed on the assessee and interest under Section 11AB can be levied in the case where duty has been paid after detection of the shortage by the department but before issuance of show cause notice in view of the facts and circumstances mentioned above? Held that - The demand was based merely on the shortage detected during physical tallying. The dealer had not taken any account of the excess use of inputs for which no credit was claimed. Accordingly, the Tribunal found that once the excesses were not clandestine receipt of input, then the same view was required to be taken with regard to shortage also, namely that the shortages are not a result of any clandestine or unauthorized utilization. The shortage has been found to be very small namely 0.24 per cent. which is fraction of the input receipt. The shortages have been found within the tolerable limits expected by an efficient management. It was, therefore, rightly held that no demand could be raised under Rule 57-I of the Rules. Accordingly, Section 11AC and Section 11AB of the Act would have no application to the facts of the present case. Appeal dismissed.
Issues Involved:
1. Imposition of mandatory penalty under Section 11AC of the Central Excise Act, 1944. 2. Levy of interest under Section 11AB of the Central Excise Act, 1944. 3. Whether the duty paid before issuance of show cause notice exempts the assessee from penalty and interest. Issue-Wise Detailed Analysis: 1. Imposition of Mandatory Penalty under Section 11AC: The core issue is whether a mandatory penalty under Section 11AC can be imposed when the duty has been paid before the issuance of a show cause notice. The Tribunal initially set aside the penalty, reasoning that if the duty is paid before the show cause notice, Sections 11AC and 11AB would not be applicable. This was based on precedents like the Larger Bench decision in Machino Montell (I) Ltd. and Rashtriya Ispat Nigam Ltd. However, the High Court remanded the case back to the Tribunal, emphasizing that pre-payment of duty does not automatically negate the imposition of penalty and interest, as per its previous judgment in Commissioner of Central Excise, Delhi-III v. M/s. Machino Montell (I) Ltd. Upon remand, the Tribunal reaffirmed its earlier decision, citing that the discrepancies were due to accounting errors and not fraudulent intent. It relied on its own judgment in Maruti Udyog Ltd. v. CCE, Delhi, which highlighted that minor discrepancies in a large business operation do not imply fraudulent intent. 2. Levy of Interest under Section 11AB: The Tribunal's stance was that interest under Section 11AB is not applicable if the duty is paid before the show cause notice. This was based on the principle that interest and penalty are punitive measures for intentional evasion, which was not established in this case. The Tribunal reiterated that there was no evidence of fraud, suppression, or willful misstatement by the dealer. 3. Duty Paid Before Issuance of Show Cause Notice: The Tribunal and the High Court discussed whether pre-payment of duty exempts the assessee from penalty and interest. The Tribunal initially held that pre-payment negates the need for penalty and interest. However, the High Court, referencing the Supreme Court judgment in Union of India v. Dharamendra Textiles Processors, clarified that penalty under Section 11AC is a civil liability and does not require proof of mens rea (intent to evade duty). The High Court emphasized that the conditions for invoking Section 11AC include fraud, collusion, willful misstatement, or suppression of facts, and these must be established for the penalty to apply. The Supreme Court's judgment in Rajasthan Spinning & Weaving Mills further clarified that the application of Section 11AC depends on establishing deliberate deception by the assessee. The High Court concluded that the Tribunal's findings of normal shortages and excesses in a large and complex accounting system, without evidence of fraudulent intent, were sufficient to negate the application of Sections 11AC and 11AB. Conclusion: The High Court upheld the Tribunal's decision that no penalty or interest under Sections 11AC and 11AB could be imposed on the dealer, as the shortages were within normal limits and there was no evidence of intent to evade duty. The appeals by the Revenue were dismissed, affirming that the Tribunal's findings did not suffer from any illegality.
|
