2010 (3) TMI 1063 - HC - Central Excise

Penalty u/s 11AC of the CEA - Whether the provisions of section 11AC are applicable to cases where show cause notice is issued subsequent to the enforcement of provisions of section 11AC i.e. 28.9.1996 even though the period of dispute is prior to 28.9.1996?

Summary

Issues:
1. Applicability of section 11AC of the Central Excise Act, 1944 to cases where the show cause notice is issued after the enforcement of the provision even though the period of dispute is prior to the enactment of the section.

Analysis:
1. The case involved an appeal under section 35G of the Central Excise Act against an order passed by the Customs, Excise, and Service Tax Appellate Tribunal. The substantial question of law considered was whether section 11AC applies to cases where the show cause notice is issued after the provision's enforcement, even if the period of dispute is before the enactment of the section.

2. Section 11AC was introduced in 1996, and a show cause notice was issued in 1998 for a period before the enactment of the provision. The order-in-original confirming the notice was set aside on appeal by the Commissioner of Central Excise.

3. The Revenue appealed the Commissioner's decision, and the Tribunal partially allowed the appeal, holding that section 11AC does not apply to disputes before its enactment. This decision was challenged in the present appeal.

4. The appellant argued that a Supreme Court judgment supported the retrospective application of section 11AC to disputes predating its enactment. However, the respondent cited other Supreme Court decisions and High Court judgments to argue against retrospective application.

5. The Court noted that the Supreme Court's observations in the mentioned case did not constitute a binding ratio. It considered other Supreme Court judgments that held section 11AC operates prospectively.

6. Following the precedent set by Supreme Court judgments, the Court held that section 11AC, being a penal provision with mandatory penalties, cannot be applied retrospectively. Therefore, it cannot be invoked for disputes or offenses before its enactment in 1996.

7. Based on the legal principles and weight of authorities, the Court ruled in favor of the assessee, holding that section 11AC does not apply to disputes predating its enactment. The appeal was disposed of accordingly.