2010 (7) TMI 336 - HC - Central Excise

Mandatory Penalty u/s 11AC- Court upheld the decision of the Tribunal that if there is no suppression of facts with intent to evade the payment of duty, penalty under Section 11AC of the Central Excise Act can not be levied.

Summary

Issues:
1. Refraining from imposing mandatory penalty under Section 11AC of the Central Excise Act, 1944.
2. Allegation of illegal utilization of credit on AED (T).
3. Confirmation of demand of duty and penalty imposition.
4. Tribunal's decision on penalty imposition.
5. Interpretation of the law on mandatory penalty under Section 11AC.
6. Applicability of penalty in cases of non-payment or short-payment of duty.
7. Tribunal's finding on suppression of facts with intent to evade payment of duty.

Analysis:

1. The appeal was filed by the revenue under Section 35G of the Central Excise Act, 1944 against the Tribunal's order proposing a substantial question of law regarding refraining from imposing mandatory penalty under Section 11AC of the Act when confirming the demand of duty of extended period under Section 11A.

2. The assessee, engaged in manufacturing motor seat parts, faced allegations of illegal credit utilization on AED (T) based on invoices in a show cause notice. The original authority confirmed duty demand and imposed a penalty, which was upheld by the Commissioner (Appeals). However, the Tribunal set aside the penalty citing lack of material for suppression of facts with intent to evade duty payment.

3. The Tribunal's decision was based on the absence of evidence for suppression of facts, leading to the conclusion that penalty under Section 11AC was not warranted. The Tribunal noted that the credit was reversed promptly by the appellants at the instance of Central Excise Officers.

4. The appellant contended that penalty imposition was automatic even without intent to evade duty payment if duty was paid less, citing judgments of the Supreme Court. However, the court rejected this argument, stating that mandatory penalty under Section 11AC does not apply to every case of non-payment or short-payment of duty.

5. The court referenced previous judgments to explain that penalty could not be levied in the absence of conditions stipulated under Section 11AC. Since there was no finding of suppression of facts with intent to evade duty payment, the penalty was deemed unwarranted by the court.

6. Consequently, the court dismissed the appeal, emphasizing that no substantial question of law arose from the Tribunal's decision. The judgment highlights the importance of fulfilling specific conditions for penalty imposition under the Central Excise Act, 1944, and the necessity of evidence for allegations of suppression of facts to justify penalties.