2009 (12) TMI 536 - HC - Central Excise

Penalty - before issuance of the show cause notice the petitioners had voluntarily deposited Central Excise Duty together with interest and penalty - duty as determined under Section 11A(2) and interest payable thereon under Section 11AB was paid within 30 days from the date of communication of the order of assessment the amount of penalty liable to be paid by the assessee would be 25% of the duty so determined - adjudicating authority wrongfully and illegally imposed 100% penalty - refund and/or remission of 75% of the penalty Held that - There is no such infirmity and/or illegality in the impugned orders that warrants interference under Article 226 of the Constitution of India - The writ application is thus dismissed.

Summary

Issues:
1. Imposition of 100% penalty on petitioners despite depositing disputed duty before show cause notice.
2. Application of amended Section 11AC of the Central Excise Act, 1944.
3. Refund claim and interest recovery on delayed payment.
4. Rejection of refund claim by Deputy Commissioner and subsequent appeal rejections.

Analysis:
1. The primary issue in this case was whether a 100% penalty could be imposed on the petitioners despite them depositing the disputed duty before the issuance of the show cause notice. The petitioners argued that the duty had been paid voluntarily even before the formal demand notice was issued. However, the authorities imposed the penalty, leading to a series of events including refund claims and appeals.

2. The application of the amended Section 11AC of the Central Excise Act, 1944 was crucial in determining the penalty amount. The amendment, effective from April 2000, stated that if duty and interest were paid within 30 days of the assessment order, the penalty would be reduced to 25% of the duty. However, in this case, the evasion occurred in 1998-99, and the show cause notice was issued before the amendment, making the amendment inapplicable.

3. The petitioners made a refund claim for 75% of the penalty amount based on the amended Section 11AC. Despite repeated reminders and modifications to the claim, the Deputy Commissioner rejected the refund claim, leading to further proceedings and appeals.

4. The rejection of the refund claim by the Deputy Commissioner and subsequent appeal rejections by the Commissioner of Central Excise and the Customs Excise and Service Tax Appellate Tribunal (CESTAT) were challenged by the petitioners. However, the courts held that since the petitioners did not challenge the original order imposing the penalty, it became binding on them, and the courts could not interfere with the adjudication and appellate orders under Article 226 of the Constitution of India.

In conclusion, the High Court dismissed the writ application, stating that there was no legal basis to interfere with the impugned orders. The judgment highlighted the importance of timely challenges to orders and the limitations of court intervention in adjudication and appellate processes under Article 226 of the Constitution of India.