2016 (1) TMI 1237 - AT - Central Excise

Imposition of penalty u/s 11AC of the Central Excise Act, 1944 - Held that - even though the demand is for extended period but there appears to be no suppression of fact on the part of the appellant. The penalty u/s 11AC can only be imposed if the non payment of duty is by the reason of fraud, collusion, suppression of fact etc. The Ld. Commissioner (Appeals) has not gone into this aspect he has waived the penalty only relying on the judgment of M/s. Machino Montell (I) Ltd. 2004 (4) TMI 101 - CESTAT, NEW DELHI , prevailing at that time therefore the matter need to be remanded to the Commissioner (Appeals) for reconsideration of the case - appeal allowed by way of remand.

Summary

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

Analysis:
1. Issue of Waiver of Penalty: The Ld. Commissioner (Appeals) waived the penalty imposed under Section 11AC of the Act, citing various judgments such as Machino Montell (I) Ltd., Rashtriya Ispat Nigam Ltd., and M/s. Laxmi Air Control Ltd. The Revenue challenged this waiver, arguing that subsequent judgments like Union of India Vs. Dharamendra Textile Processors and Union of India Vs. Rajasthan Spinning & Weaving Mills held that penalty under Section 11AC cannot be waived or reduced.

2. Arguments by Revenue: The Revenue contended that the penalty was waived by the Commissioner (Appeals) under Section 11AC, contrary to the subsequent legal position. They highlighted the case law evolution, emphasizing that penalties under Section 11AC cannot be waived or reduced based on recent Supreme Court decisions.

3. Respondent's Defense: The respondent's counsel argued that while penalties under Section 11AC cannot generally be waived or reduced, in this case, the penalty was not imposable as there was no suppression of fact by the appellant. They pointed out that the demand was voluntarily admitted without suppression, citing specific instances related to the recovery of amounts under Cenvat Credit Rules and scrap generated during job work. They relied on judgments like Commissioner of Central Excise Goa Vs. Sunrise Zinc Ltd. and Commissioner of C. Ex. Vs. Rocket Engineering Corporation Ltd. to support their stance.

4. Tribunal's Decision: After considering both sides' arguments, the Tribunal found merit in the respondent's submission that there was no suppression of fact on the part of the appellant. The Tribunal noted that penalties under Section 11AC can only be imposed in cases involving fraud, collusion, or suppression of fact. As the Ld. Commissioner (Appeals) did not delve into this aspect and based the waiver solely on previous judgments, the matter was remanded to the Commissioner (Appeals) for reconsideration. The appeal was allowed by way of remand, with the cross-objection also being disposed of accordingly.

This detailed analysis of the judgment highlights the key legal arguments, case law references, and the Tribunal's decision regarding the imposition of penalties under Section 11AC of the Central Excise Act, 1944.