2009 (5) TMI 942 - AT - Central Excise

Summary

Issues involved: Imposition of penalty under Section 11AC of the Central Excise Act, 1944.

The appeal was filed by the Revenue against the order-in-appeal No. RKR(172)33/07 dated 31.08.2007 passed by the Commissioner of Central Excise regarding the imposition of penalty under Section 11AC of the Central Excise Act, 1944. The case involved M/s. Medicore Labs Pvt. Ltd. manufacturing medicaments and food products without payment of duty, leading to a demand for Central Excise duty, penalty under Section 11AC, and interest. The Joint Commissioner confirmed the duty demand, imposed penalty under Section 11AC, and confirmed interest under Section 11AB. The assessee appealed to the Commissioner (Appeals) challenging the duty confirmation for the years 2002-03 & 2003-04 based on an amendment to Notfn. No. 8/2003-CE. The Commissioner (Appeals) upheld duty confirmation up to a certain amount and reduced the penalty to Rs. 50,000 based on the prospective application of the amendment.

The Revenue contended that once duty is re-determined under Section 11A of the Central Excise Act, 1944, there is no discretion to determine the penalty under Section 11AC. Citing a Supreme Court decision, it was argued that the authorities cannot levy less duty than what is legally leviable. The Revenue emphasized the mandatory nature of penalty under Section 11AC as per the legislative intent and the clear language of the statute introduced in the Union Budget of 1996-97.

The Member (Judicial) agreed with the Revenue's argument, citing the Supreme Court's decision in the case of Union of India & Ors. Vs. M/s. Dharmendra Textile Processors & ors., and CCE, Tirupati vs. Morarcho Pipes Ltd. The Member held that under Section 11AC of the Central Excise Act, 1944, an equivalent penalty is leviable as confirmed by the adjudicating authority and the Apex Court. Consequently, the appeal was allowed, and the Cross Objection filed by the respondent was disposed of accordingly.