2011 (3) TMI 1531 - HC - Central Excise

Summary

Issues involved: The appeal raised questions regarding the imposition of penalty under Rule 571(4) of Central Excise Rules, 1944 when irregular credit is reversed before the issuance of Show Cause Notice, and the correctness of the Tribunal's decision on penalty despite suppression of facts detected by preventive officers.

Issue 1 - Penalty Imposition: The Tribunal's order lacked discussion on circumstances under Section 11AC of the Central Excise Act, 1944 justifying penalty imposition, despite stating that penalty and interest are not leviable if duty is paid before the show-cause notice. Referring to a Supreme Court decision, it was clarified that payment timing does not affect penalty liability under Section 11AC. Consequently, the Tribunal's view was overturned based on the Apex Court's ruling.

Issue 2 - Levy of Penalty: Section 11AC mandates that penalty imposition is not automatic and requires proof of fraud, willful misstatement, collusion, suppression of fact, or contravention of Act provisions with intent to evade duty payment. As no such findings were established, the Court decided to remit the matter back to the Tribunal for a proper determination after affording the concerned party an opportunity.

Issue 3 - Tribunal's Order: While the Order-in-Original considered circumstances for penalty levy, it was deemed insufficient to support the Tribunal's decision under challenge. Due to this deficiency in legal consideration, the Tribunal's order was set aside, and the matter was sent back for a fresh determination on the penalty imposition under Section 11AC of the Central Excise Act, 1944.