2011 (7) TMI 215 - HC - Central Excise

Penalty and interest - Whether assessee is not responsible for any penalty and interest since they have deposited the duty before the issue of show cause notice - decision of the Supreme Court in Sony India Ltd.,V/s Commissioner of Central Excise, Delhi 2004 (167) E.L.T. 385 in which it was held that mere deposit of the amount prior to the issuance of the show cause notice under Section 11A of the Act will not necessarily negate the situation mentioned in the said Section - Decided against the assessee.

Summary

Issues:
1. Whether the respondent is liable for penalty and interest for not depositing the duty before the issue of show cause notice.
2. Interpretation of Section 11A of the Act regarding the deposit of duty prior to the issuance of a show cause notice.

Analysis:
1. The High Court of Bombay heard an appeal where the Commissioner of Central Excise challenged the order of the CESTAT, which absolved the respondent (MRF) from penalty and interest as they had deposited the duty before the show cause notice was issued. The Tribunal's decision was based on precedents, including Rashtriya Ispat Nigam Ltd. case and CCE, Delhi III V/s Machino Montell (I) Ltd case.

2. The Revenue contended that the decision of the Himachal Pradesh High Court in C.C.E., Chandigarh V/s Himachal Exicom Communications Ltd. should be followed, which relied on the Supreme Court's decision in Sony India Ltd. V/s Commissioner of Central Excise. The Supreme Court had held that the mere deposit of the amount before the issuance of a show cause notice under Section 11A of the Act does not automatically absolve liability.

3. The High Court disagreed with the Tribunal's decision and held that the respondent could still be liable for penalty and interest despite the early deposit of duty. The Court found an error in the Tribunal's reasoning and remanded the matter for a fresh decision. The Court clarified that the argument regarding the initiation of recovery proceedings beyond the limitation period under Section 11A was still open for consideration.

4. Ultimately, the High Court set aside the Tribunal's order, emphasizing that the deposit of duty before the show cause notice does not automatically exempt the respondent from penalty and interest. The matter was remanded for further consideration, and the issue of liability, including the limitation period under Section 11A, was left open for future determination.

5. The judgment was delivered by S. A. BOBDE, J, and F. M. REIS, J. The Court made the rule absolute in the above terms, with no order as to costs.