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2009 (8) TMI 1063 - AT - Central ExcisePenalty - Clandestine removal - scope of SCN - Section 11A(2B) - whether the respondent is liable to be visited with penalty under Section 11AC for the clandestine removal of the finished goods? - Held that - reliance placed in the case of Union of India Versus M/s Rajasthan Spinning & Weaving Mills AND Commissioner of Customs and Central Excise Versus M/s. Lanco Industries Ltd. 2009 (5) TMI 15 - SUPREME COURT OF INDIA , where it was held that the penalty provisions of Section 11AC would come into play only after an order is passed u/s 11A(2). An order u/s 11A(2) can be passed by an authority only after he has issued a SCN u/s 11A(1) of the CEA, 1944. The non-imposition of penalty by the adjudicating authority under Provisions of Section 11AC and as upheld by the learned Commissioner (Appeals) is correct and legal though the reasoning may be different - appeal rejected - decided against Revenue.
Issues Involved:
1. Clandestine removal of goods without filing returns. 2. Request for waiver of show cause notice. 3. Applicability of penalty under Section 11AC of the Central Excise Act, 1944. 4. Non-issuance of show cause notice and its implications. Detailed Analysis: 1. Clandestine Removal of Goods Without Filing Returns: The respondent was charged with clandestine removal of final products during the period from 1-4-03 to 31-3-04 without notifying or filing returns with the department. The respondent admitted to this and paid the entire duty liability with interest, requesting the authorities to close the issue without issuing a show cause notice. 2. Request for Waiver of Show Cause Notice: The respondent, in their letter dated 31-3-05, requested the authorities to drop the proceedings and not issue a show cause notice since they had already discharged the duty liability with interest. The adjudicating authority, without issuing a show cause notice, confirmed the demand under the proviso to Section 11A(1) and charged interest on the duty. However, the authority did not impose any penalty under Section 11AC but imposed a penalty of Rs. 15,000/- on the Director of the respondent company. 3. Applicability of Penalty Under Section 11AC of the Central Excise Act, 1944: The revenue appealed, arguing that the adjudicating authority should have imposed a penalty under Section 11AC since the respondent admitted to the clandestine removal of goods. The revenue cited decisions from higher courts to support the automatic applicability of Section 11AC in cases of admitted clandestine removal. The respondent countered that the proceedings were concluded as per Section 11A(2B), which does not require a show cause notice if the duty and interest are paid. The respondent argued that Section 11AC penalties are not applicable in this context. 4. Non-Issuance of Show Cause Notice and Its Implications: The tribunal examined the provisions of Section 11A and Section 11AC. Section 11A(1) mandates issuing a notice for unpaid or short-paid duties, with a proviso extending the period to five years in cases involving fraud or suppression of facts. Section 11A(2B) allows the assessee to pay the duty before the notice is served, avoiding the need for a show cause notice, except in cases involving fraud or suppression of facts. Section 11AC imposes penalties only after duty determination under Section 11A(2), which requires a prior show cause notice under Section 11A(1). The tribunal concluded that since no show cause notice was issued under Section 11A(1), there was no determination of duty under Section 11A(2), making the imposition of a penalty under Section 11AC inapplicable. The tribunal referenced the Supreme Court's decision in Rajasthan Spinning and Weaving Mills, which clarified that penalties under Section 11AC apply only after a finding of deliberate wrongdoing in an order passed under Section 11A(2). Conclusion: The tribunal upheld the lower authorities' decision not to impose a penalty under Section 11AC, agreeing that the non-issuance of a show cause notice was vital to the case. The appeal by the revenue was rejected, and the orders of the lower authorities were affirmed as correct and legal.
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