2014 (2) TMI 1190 - HC - Central Excise

Validity of Tribunal s order - Whether the CESTAT is right in dismissing the appeal and vacating the mandatory penalties imposed when there is a plethora of conflicting decision on the same issue by various higher appellate forums/authorities - Held that - Respondent has to pay Central Excise Duty in the years 1994, 1995 and 1996, but they paid duty only on 5-11-1997. Even though, the respondent has paid duty on 5-11-1997 and that too prior to issuance of show cause notice, dated 7-9-1998, the respondent cannot absolve its liability from paying penalty under the Section mentioned - CESTAT without properly considering the said provision has simply found that since before the issuance of show cause notice the respondent has paid Central Excise Duty, it need not pay penalty. Since the said Section deals with short levy or short payment or erroneous refund and non-payment, this Court is of the view that the approach made by the CESTAT with regard to penalty is totally erroneous and therefore, the order passed by the CESTAT is liable to be set aside and the substantial question of law settled in the present Civil Miscellaneous Appeal is having substance. - Decided in favour of Revenue.

Summary

Issues:
- Appeal against order passed by CESTAT regarding duty, interest, and penalty in a case involving distribution of gift boxes without paying duty.

Analysis:
1. The respondent engaged in the business of fireworks and distributed gift boxes without paying duty in 1994, 1995, and 1996. A show-cause notice was issued in 1998 demanding duty, interest, and penalty. The Order-in-Original upheld the demand, which was further challenged before the Commissioner of Appeals and then CESTAT.

2. CESTAT partially allowed the appeal, setting aside the penalty but upholding the duty and interest demands. The Department appealed against the penalty decision, leading to the present Civil Miscellaneous Appeal.

3. The Court considered the substantial question of law: whether CESTAT was correct in dismissing the appeal and vacating the penalties imposed, given conflicting decisions by higher appellate forums. The appellant's counsel highlighted Section 11AC of the Central Excise Act, 1944, dealing with penalties for non-payment.

4. The Court noted that the respondent paid duty only in 1997, after the years in question, but before the show-cause notice in 1998. Despite this, the Court held that the respondent was liable for penalty under Section 11AC for non-payment.

5. The Court found CESTAT's approach to penalty erroneous, as the provision covers cases of short levy, short payment, erroneous refund, and non-payment. Consequently, the Court set aside CESTAT's order on penalty, allowing the Civil Miscellaneous Appeal without costs and closing the connected Miscellaneous Petition.