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2010 (10) TMI 1027 - HC - Central ExciseInterpretation of statute - Jurisdiction - Whether the Tribunal has the power to reduce mandatory penalty u/s 11AC of the CEA, 1944?? - Held that - issue is no more res integra in view of the judgments of the Apex Court in the case of Union of India v. Dharmendra Textile Processors, 2008 (9) TMI 52 - SUPREME COURT . In the said judgments the Hon ble Supreme Court has held that while interpreting the provisions of law the Court only interprets and cannot legislate and further that where wordings of the Statute are unambiguous and do not lead to absurd and unreasonable results, they have to be given their full effect, without adding any foreign words to the same - question is answered in the negative i.e. in favour of the Revenue and against the Assessee holding that the Tribunal on its own cannot reduce mandatory penalty under section 11AC of the Act for want of power in that behalf. Whether the respondents are entitled to the benefit of first and second provisos to section 11AC of the CEA, 1944? - Held that - in order to avail the benefit of 25% penalty, the duty, interest and penalty are required to be paid within 30 days of communication of the order passed by the adjudicating authority. Further, the reading of proviso (4) would also support this interpretation because the said proviso stipulate that wherever duty amount is increased at any appellate stage, in that case in order to avail the benefit of 25% penalty, the assessee is required to pay differential amount within 30 days of the passing of the order by the appellate authority - the appellant did not comply with the requirements of the provisos to section 11AC of the Act since the appellant did not pay the amount of interest under section 11AC within a period of 30 days from the date of receipt of quantified demand. In view of this admitted position, it is not necessary to go into the details of payment made by the petitioner in respect of duty liability, interest and penalty - question is answered in favor of the Revenue and against the Assessee. Appeal allowed - decided in favor of Revenue.
Issues Involved:
1. Whether the Tribunal has the power to reduce mandatory penalty under section 11AC of the Central Excise Act, 1944. 2. Whether the respondents are entitled to the benefit of the first and second provisos to section 11AC of the Central Excise Act, 1944. Issue-Wise Detailed Analysis: As to Question No. 1: The first issue concerns whether the Tribunal has the power to reduce mandatory penalties under section 11AC of the Central Excise Act, 1944. The court referenced the Supreme Court judgments in Union of India v. Dharmendra Textile Processors and Union of India v. Rajasthan Spinning and Weaving Mills. These judgments established that courts interpret statutes without adding foreign words and must give full effect to unambiguous statutory wordings. Based on these precedents, the court concluded that the Tribunal does not have the power to reduce mandatory penalties under section 11AC, answering the first question in favor of the Revenue and against the Assessee. As to Question No. 2: The second issue revolves around the interpretation of the provisos to section 11AC of the Act. Section 11AC mandates that an amount equal to the duty determined by the Central Excise Officer must be paid by the assessee in cases of fraud, collusion, willful misstatement, suppression of facts, or contravention of the Act with intent to evade duty. The first proviso allows a reduced penalty of 25% if the duty and interest are paid within thirty days from the order's communication. The second proviso stipulates that this reduced penalty is contingent on the penalty amount being paid within the same thirty-day period. The court noted that the third proviso addresses situations where the duty is adjusted by an appellate authority, ensuring that the adjusted duty is considered for penalty purposes. The fourth proviso extends the reduced penalty benefit to cases where increased duty is paid within thirty days of the appellate order. The court referenced several judgments, including K.P. Pouches (P) Limited v. Union of India, which emphasized the necessity for adjudicating authorities to explicitly inform assessees of their options under section 11AC. The Punjab & Haryana High Court in Commissioner of Central Excise, Rohtak v. J.R. Fabrics Private Limited, and the Gujarat High Court in Commissioner of Central Excise v. Gopal Fibres Pvt. Ltd., further clarified the requirements for the reduced penalty benefit, highlighting the importance of quantifying and communicating the duty and interest amounts to the assessee. The Central Excise department's Circular No. 898/18/2009-CX reinforced these interpretations, stating that the benefit of a reduced penalty applies only if the duty, interest, and reduced penalty are paid within thirty days of the adjudicating authority's order. The circular also clarified that if the penalty amount is increased at the appellate stage, the differential penalty must be paid within thirty days to retain the reduced penalty benefit. Consideration on Merits: The court noted that the appellant did not comply with the thirty-day payment requirement for the interest under section 11AC, thus disqualifying them from the reduced penalty benefit. Consequently, the second question was also answered in favor of the Revenue and against the Assessee. Directions to the Authorities under the Act & Tribunal: To ensure clarity for assessees, the court directed adjudicating, appellate, and revisional authorities, as well as courts, to explicitly state in their orders that if the quantified duty and interest are paid within thirty days, the penalty will be 25% of the duty liability. This directive aims to help assessees take advantage of the reduced penalty provision under section 11AC. Conclusion: The appeal was disposed of with no order as to costs, affirming the positions favoring the Revenue on both issues.
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