2012 (10) TMI 1135 - HC - Central Excise

Summary

Issues involved:
1. Justification of setting aside mandatory penalty under Section 11AC of the Central Excise Act by appellate Authorities.
2. Justification of setting aside interest levied under Section 11AB of the Central Excise Act by appellate Authorities.

Issue 1 - Penalty under Section 11AC:
The CESTAT, based on the judgment in Commissioner of Central Excise v. Machino Montal (I) Ltd., ruled that penalty under Section 11AC cannot be imposed if duty was paid before the show cause notice. However, the Apex Court in Union of India v. Rajasthan Spinning & Weaving Mills clarified that once Section 11AC applies, the penalty is mandatory regardless of when the duty was paid. Consequently, the CESTAT's order was quashed, and the matter was remanded for fresh decision.

Issue 2 - Interest under Section 11AB:
The judgment primarily focused on the penalty under Section 11AC, and there was no specific mention of the interest levied under Section 11AB in the summary provided. Therefore, it can be inferred that the interest aspect was not the main subject of contention in this particular case.

Conclusion:
The appeal was admitted to address the questions of law regarding the imposition of penalty under Section 11AC and interest under Section 11AB. The CESTAT's decision was overturned based on the Apex Court's interpretation of the mandatory nature of penalties under Section 11AC. The case was remanded for further consideration in line with the legal principles outlined in the judgment.