2010 (10) TMI 970 - HC - Central Excise

Summary

Issues involved: Interpretation of penalty provisions under Section 11AC of the Central Excise Act, 1944.

Summary:
The High Court considered the issue of whether the penalty leviable under Section 11AC of the Central Excise Act, 1944 can be reduced even when duty evasion is proven, and if the authority reducing the penalty must provide reasons for the reduction. The Supreme Court had authoritatively ruled in the case of Union of India v. Dharamendra Textile Processors that the penalty specified under Section 11AC cannot be reduced by authorities, and mens rea is not a necessary element for imposing the penalty. The Supreme Court further clarified in Union of India v. Rajasthan Spinning & Weaving Mills that the penalty under Section 11AC must be imposed if conditions like fraud, collusion, wilful misstatement, or suppression of facts are satisfied, leaving no discretion with the authority to impose a lesser penalty. Therefore, the High Court held that the penalty under Section 11AC cannot be less than the determined amount under Section 11A(2) of the Act, and 100% penalty must be imposed in such cases, with no discretion for reduction. The Court set aside the Tribunal's order reducing the penalty, as the conditions under Section 11AC were not examined in the present proceedings. The appeal was allowed with no costs.