2010 (2) TMI 1148 - HC - Central Excise

Summary

Issues involved: Interpretation of proviso of Section 11AC of the Central Excise Act, 1944 regarding deposit of interest and penalty within 30 days to avail benefit of reduced penalty at 25% of duty.

The Tax Appeal was filed by the Commissioner of Central Excise, Ahmedabad under Section 35-G of the Central Excise Act, 1944. The appeal questioned whether the CESTAT erred in offering the assessee the option to deposit interest and penalty within 30 days of its order to avail the benefit of reduced penalty at 25% of duty, despite not re-determining the quantum of duty. The brief facts revealed that the adjudicating authority raised a duty demand, of which a portion was paid by the assessee. The authority confirmed the duty demand, imposed a penalty, and charged interest. The Commissioner (Appeals) reduced the penalty, which was further challenged by the revenue before the Tribunal. The Tribunal dismissed the appeal, leading to the Tax Appeal before the High Court for enhancement of penalty equal to duty evaded under Section 11AC. The Court remanded the matter to the Tribunal for fresh consideration in light of a Supreme Court decision. The Tribunal then enhanced the penalty but allowed the assessee to deposit 25% of the penalty within 30 days to restrict the penalty to 25% of the duty amount, based on a judgment of the Punjab & Haryana High Court.

The Revenue contended that the Tribunal wrongly interpreted the law by offering the option to pay reduced penalty without re-determining the duty amount. They argued that the legislation intended to provide the option of reduced penalty only when the duty amount is changed by appellate authorities. The Revenue cited a Circular clarifying the conditions to avail the benefit of reduced penalty. The Court, after considering previous judgments, upheld the Tribunal's decision to retain the penalty at 25% of the duty amount, stating that the order seemed justified based on legal precedents.

The Court addressed the issue of non-compliance with the precondition for the reduced penalty under Section 11AC. Despite the duty amount, interest, and reduced penalty not being paid within the specified period, the Court granted the benefit of the Proviso by directing the adjudicating authority to offer the option to the assessee. It was noted that the adjudicating authority should 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 to the assessee the outstanding interest and penalty amount to be paid within 30 days to avail the benefit of reduced penalty, failing which penalty equivalent to the duty amount would be imposed.

The Court found no substance in the tax appeal and dismissed it, stating that no substantial question of law arose from the Tribunal's order, which was in line with the Court's previous decisions.