2010 (12) TMI 387 - HC - Central Excise

Demand - Applicability of Section 11AC - Excise duty was deposited prior to the issuance of the show cause notice - Whether penalty should be imposed or not - Matter is remanded back to AO or fresh decision on the issue of penalty after determining the question whether the non-payment of duty in the present case was on account of fraud, collusion or any willful mis-representation or suppression of facts or contravention of any of the provisions of the Excise Act or the Rules made thereunder with intention to evade payment of duty as laid down under Section 11AC - The appeal is disposed of

Summary

Issues:
1. Imposition of interest and penalty on deposited Central Excise Duty.

Analysis:
The High Court addressed the issue of whether interest and penalty are applicable when Central Excise Duty is deposited by the assessee before a show cause notice, but not voluntarily. The Court referred to two cases where it was held that depositing the duty after detection by the department does not necessarily negate the liability for penalty under Section 11AC of the Excise Act. The Court emphasized that penalty can be imposed if the assessee's actions are not bona fide, aligning with the principle that those trying to evade duty through mala fide methods should not escape penalty when caught. The Court clarified that depositing the duty after being caught but before the show cause notice does not exclude the applicability of Section 11AC.

The respondent argued that the lower authorities did not assess whether the case fell under Section 11AC and other relevant provisions of the Act. The Court noted that the question of imposing a penalty is a factual matter that needs determination. Since the Assessing Officer, Commissioner (Appeals), and Tribunal did not decide on the penalty issue beyond the deposit timing, the Court set aside their decisions. The case was remanded to the Assessing Officer for a fresh decision on the penalty issue, instructing to determine if the non-payment of duty resulted from fraud, collusion, willful misrepresentation, suppression of facts, or contravention of Excise Act provisions with an intent to evade duty, as specified in Section 11AC.

In conclusion, the appeal was disposed of by remanding the case to the Assessing Officer for a fresh decision on the penalty issue based on the specified criteria. No costs were awarded in this matter.