2010 (4) TMI 774 - HC - Central Excise

Penalty u/s 11AC - Since their is no allegation with supporting evidence regarding the duty was short-levied or short-paid on account of suppression of facts misdeclaration fraud or collusion etc. in the show cause notice - therefore Tribunal is correctly deleted the penalty.

Summary

Issues:
1. Imposition of penalty under Section 11AC of the Central Excise Act.
2. Finality of the issue regarding classification of the product.
3. Justification of quashing the penalty imposed under Section 11AC.

Analysis:
1. The main issue in this case was the imposition of a penalty under Section 11AC of the Central Excise Act. The Tribunal had deleted the penalty, citing two primary grounds. Firstly, the show cause notice did not contain any allegations of suppression of facts, misstatement, fraud, or collusion, which are necessary for imposing such a penalty. Secondly, the issue regarding the penalty had not attained finality until a later order was passed. The Tribunal's decision to delete the penalty was based on these grounds.

2. The appellant argued that the issue had attained finality before the penalty proceedings, and the Tribunal erred in its decision. However, the Court found that the Tribunal was justified in its decision as the show cause notice lacked allegations of any of the factors required for imposing a penalty under Section 11AC. The Court emphasized that this section allows penalties only in cases of fraud, collusion, wilful misstatement, suppression of facts, or contravention of the Act with intent to evade duty, none of which were present in this case. Therefore, the Tribunal's deletion of the penalty was upheld, and the tax appeal was dismissed.

3. The final issue addressed was the justification for quashing the penalty imposed under Section 11AC. The Court concluded that since the show cause notice did not contain any allegations of the necessary factors for imposing a penalty, the Tribunal's decision to delete the penalty was correct. The Court thoroughly examined the order passed by the Tribunal and the contents of the show cause notice to reach this decision. As a result, the penalty was quashed, and only the duty amount along with interest was confirmed and upheld. The Court upheld the Tribunal's decision and dismissed the tax appeal accordingly.