2010 (6) TMI 792 - AT - Central Excise

Summary

Issues:
1. Dropping of penalty under Section 11AC by the Commissioner (Appeals).

Analysis:
The appeal was filed by the Revenue against the dropping of the penalty of Rs. 2,08,253/- under Section 11AC by the Commissioner (Appeals). The case involved the clandestine removal of goods without payment of Central Excise duty by the respondents, who were engaged in the manufacture of Cast Iron Casting and Cast Steel Castings. The Preventive Officers visited the factory premises and recorded statements indicating the evasion of duty. The show-cause notice was issued for demanding duty, interest, and penalty under Rule 25 of Central Excise Rule 2002 read with Section 11AC of the Central Excise Act, 1944. The Commissioner (Appeals) reduced the duty demand but set aside the penalty under Section 11AC based on the decision of Machino Montell (I) Ltd. 2004 (62) RLT 709, which stated that if duty is paid before the issuance of the show-cause notice, no penalties are applicable under Section 11AC.

The Revenue contended that there was suppression of fact with intent to evade payment of duty, citing the decision of the Hon'ble Apex Court in Union of India vs. Rajasthan Spinning & Weaving Mills. The Revenue argued that mandatory penalty under Section 11AC should be imposed if there is evidence of duty evasion. On the other hand, the respondent's advocate argued that the show-cause notice did not propose a penalty under Section 11AC, relying on the case of Schrader Duncan Ltd. vs. CCE Mumbai III. This case highlighted that when a show-cause notice involves Rule 25 of the Central Excise Rules, 2002, no penalty can be levied under Section 11AC.

Upon examination of the show-cause notice, it was found that there was no proposal to penalize the respondent under Section 11AC, aligning with the findings in the Schrader Duncan Ltd. case. The Tribunal upheld that when there is a proposal under Rule 25, no penalty can be imposed under Section 11AC. The Tribunal concluded that penalties under Section 11AC should not be imposed on the respondent, following the precedent set by the cited case. Consequently, the impugned order dropping the penalty was upheld, and the appeal filed by the Revenue was rejected.