2010 (2) TMI 1128 - HC - Central Excise

Summary

Issues: Interpretation of proviso of Section 11AC of the Central Excise Act, 1944 regarding reduced penalty.

Analysis:
1. The case involved a Tax Appeal filed by the Commissioner of Central Excise, Ahmedabad, questioning the interpretation of the proviso of Section 11AC of the Central Excise Act, 1944 by the CESTAT. The issue was whether the CESTAT erred in allowing an assessee to deposit interest and penalty within 30 days of its order to avail the benefit of reduced penalty at 25% of duty without re-determining the quantum of duty.

2. The adjudicating authority had confirmed a duty demand and imposed a penalty and interest on the respondent-assessee. The Commissioner (Appeals) and the Tribunal had upheld the duty demand but reduced the penalty. The Revenue challenged the Tribunal's order, seeking enhancement of penalty equal to the duty evaded under Section 11AC of the Act.

3. The Tribunal, following the Punjab & Haryana High Court judgment, allowed the assessee to deposit 25% of the penalty within 30 days to restrict the penalty to 25% of the duty amount. The Revenue contended that the Tribunal's decision was based on an incorrect interpretation of the law as the duty quantum was not re-determined.

4. The High Court, after considering previous judgments, upheld the Tribunal's decision, stating that the order retaining the penalty at 25% of the duty amount was justified. The Court emphasized that the benefit of reduced penalty applies when duty, interest, and penalty are paid within 30 days of the adjudicating authority's order.

5. The Court also addressed the issue of non-compliance with the precondition for availing the reduced penalty, noting that despite non-payment within the stipulated time, the Court granted the benefit by directing the adjudicating authority to provide the option to the assessee.

6. The Court clarified that the adjudicating authority must mention the availability of the reduced penalty in its order, as per Circulars issued by the Central Excise Department. The Court directed the authority to communicate any outstanding interest or penalty to the assessee for compliance within 30 days to avail the benefit; otherwise, penalty under Section 11AC would apply.

7. The Court dismissed the appeal, stating that no substantial question of law arose from the Tribunal's order, which aligned with the Court's previous decisions. The judgment emphasized the importance of timely payment of duty, interest, and penalty to avail the benefit of reduced penalty under Section 11AC.