2014 (5) TMI 1039 - HC - Central Excise

Penalty u/s 11AC - Whether imposition of 100% penalty is justifiable when the duty as well as interest along with 25% of the duty has been deposited prior to the passing of the Order-in-Original dated July 20, 2009 by the adjudicating authority and/or denial of benefit provided under Section 11AC of the Act is wrong and contrary to law - Held that - Divisional Preventive Staff conducted an inspection of the appellant-firm on July 30, 2008 during which, 20.100 MT quantity of Silicon Manganese involving Cenvat credit of ₹ 2,14,483/- was found deficit. The said fact was admitted by Darbara Singh, one of the partners of appellant-firm but he could not furnish any plausible explanation for the shortage. Accordingly, the respondent-Revenue issued a show cause notice dated January 30, 2009 which was duly replied. At the time of filing of reply to the show cause notice on February 10, 2009, the amount of duty and interest payable thereon along with 25% penalty was deposited much prior to the passing of the impugned order dated July 20, 2009 imposing penalty, of ₹ 2,14,483/- which is equal to the amount of duty of excise determined by the adjudicating authority. - whereas authority relied upon by learned Counsel for respondent-Revenue captioned as Dharamendra Textile Processor s case (2008 (9) TMI 52 - SUPREME COURT) is not applicable to the facts of the case in hand. Even otherwise, learned Counsel for the respondent-Revenue has also failed to show any judgment taking a contrary view - Decided in favour of assessee.

Summary

Issues:
1. Imposition of 100% penalty when duty, interest, and 25% of the duty were deposited prior to the adjudication order.
2. Interpretation of Section 11AC of the Central Excise Act, 1944 regarding penalty for short-levy or non-levy.

Issue 1: Imposition of 100% penalty when duty, interest, and 25% of the duty were deposited prior to the adjudication order.
The appellant, a trading firm of iron and steel products, was debarred from passing on Cenvat credit due to a deficit found during an inspection. The appellant deposited the duty, interest, and 25% of the duty prior to the adjudication order. The firm challenged the penalty before various authorities, including the Tribunal, which upheld the penalty. The appellant argued that as per Section 11AC, if duty and interest are paid within 30 days, the penalty should be 25% of the duty. The appellant cited relevant case laws to support their argument. The respondent contended that 100% penalty was justified as per the interpretation of Section 11AC by the Supreme Court. The court analyzed the provisions of Section 11AC and concluded that the appellant's case aligned with previous judgments where only 25% penalty was imposed in similar situations. The court ruled in favor of the appellant, setting aside the penalty.

Issue 2: Interpretation of Section 11AC of the Central Excise Act, 1944 regarding penalty for short-levy or non-levy.
Section 11AC of the Act mandates a penalty equal to the duty determined in cases of non-payment or short payment of excise duty due to fraud or willful misstatement. The section provides for a reduced penalty of 25% if duty and interest are paid within 30 days. The court examined the facts of the case where the appellant had deposited the duty, interest, and 25% of the duty before the adjudication order. Citing relevant case laws, the court found that the appellant's case fell within the ambit of cases where only 25% penalty was applicable. The court highlighted the importance of timely payment of duty and interest to avail the reduced penalty as per Section 11AC. The court's interpretation favored the appellant, emphasizing adherence to the provisions of the Act.