2009 (12) TMI 834 - AT - Central Excise

Summary

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

Summary:

Issue 1: Imposition of penalty under Section 11AC

The appeal filed by the Revenue questioned the imposition of a penalty under Section 11AC of the Central Excise Act on the respondent. The show-cause notice issued to the respondent proposed a penalty under Section 11AC, along with demanding interest on duty under Section 11AB. The respondent had reversed Cenvat credit along with interest before the notice was issued, contesting the penalty proposal. The original authority refrained from imposing the penalty, a decision upheld by the appellate authority. The Revenue contended that the case law relied upon by the Commissioner (Appeals) was not applicable and that Explanation 1 to sub-section (2B) of Section 11A was not considered. The Revenue also disputed the Tribunal's Larger Bench decision in a previous case. The High Court remanded the case to the Tribunal for a fresh decision on the applicability of Sections 11AB and 11AC to the facts of the case.

Issue 2: Allegations under Section 11AC

Upon reviewing the show-cause notice, it was found that although Section 11AC was invoked against the respondent, there were no allegations of fraud, collusion, suppression of facts, or contravention of any law with intent to evade payment of duty. Section 11AC can only be invoked when such allegations are made and proven. Since none of these allegations were made against the respondent, the decision of the lower authorities to dismiss the penalty imposition was deemed appropriate. Consequently, the Revenue's appeal was dismissed.

This judgment clarifies the stringent requirements for imposing penalties under Section 11AC of the Central Excise Act, emphasizing the necessity of proving fraud, collusion, or wilful misstatement of facts for such penalties to be applicable.