2010 (2) TMI 1053 - HC - Central Excise

Whether the CESTAT committed error in interpreting proviso of Section 11AC of the Central Excise Act, 1944 by offering to an assessee to deposit amount of interest and penalty within 30 days of its order to avail benefit of reduced penalty at 25% of duty, though CESTAT has not re-determined the quantum of duty? Held that - In the case on hand, since the duty amount has already been paid by the respondent-assessee and if the interest and/or reduced penalty of 25% were not paid by the respondent-assessee, the adjudicating authority may send a communication to the respondent-assessee indicating therein that the particular amount of interest and/or 25% of the penalty of the duty amount is not paid by the respondent-assessee and hence if the assessee wants to avail the benefit of the reduced penalty of 25%, such amount of interest and/or penalty of 25% should be paid within 30 days from the date of receipt of such communication, failing which they would be liable to pay penalty under Section 11AC equivalent to the amount of duty. Since the order passed by the Tribunal is in accordance with the view taken by this Court, there is no question of considering the Circular issued by the Central Board of Indirect Taxes on which reliance was placed by Mr. Ravani. In the above view of the matter, we do not see any substance in this tax appeal and no substantial question of law can be said to have arisen out of the order of the Tribunal. This appeal is, therefore, summarily dismissed

Summary

Issues:
Interpretation of proviso of Section 11AC of the Central Excise Act, 1944 by CESTAT, power of Tribunal to offer option for reduced penalty, compliance with statutory obligations by adjudicating authority.

Analysis:
The Tax Appeal before the Gujarat High Court involved the interpretation of the proviso of Section 11AC of the Central Excise Act, 1944 by the CESTAT. The Commissioner of Central Excise challenged an order raising duty demand and imposing penalty, which was upheld by the Commissioner (Appeals) and dismissed by the Tribunal. The High Court remanded the matter to the Tribunal for reconsideration in light of a Supreme Court decision. The Tribunal then enhanced the penalty but allowed the respondent to deposit 25% of the penalty within 30 days, following a judgment of the Punjab & Haryana High Court. The Revenue contended that the Tribunal erred in offering this option without re-determining the duty amount.

The Court considered the arguments presented, noting that similar issues had been addressed in previous judgments. It was observed that the Tribunal's decision to retain the penalty at 25% of the duty amount was deemed justified based on previous legal interpretations. The Court referred to various precedents and held that the Tribunal's order was in line with established principles. The Court also discussed the compliance requirements for availing the benefit of reduced penalty under Section 11AC, emphasizing the importance of adhering to statutory obligations.

Regarding the adjudicating authority's obligations, the Court highlighted the necessity of explicitly mentioning the provisions related to reduced penalty in the order-in-original. The Court referenced a Circular issued by the Central Excise Department and directed the adjudicating authority to provide clear options to the assessee for payment within the specified timeframe. The Court emphasized the importance of following statutory guidelines and circulars in such matters.

In conclusion, the Court found no merit in the Tax Appeal and dismissed it, stating that no substantial question of law arose from the Tribunal's order. The judgment reaffirmed the Tribunal's decision regarding the penalty amount and emphasized the significance of compliance with statutory provisions and circulars in such cases. The Court's decision aligned with previous rulings and established legal interpretations, providing clarity on the issue at hand.