2010 (12) TMI 588 - HC - Central Excise

Penalty u/s 11AC - Evasion of duty - Rule 25 of the Central Excise Rule, 2002 - it is apparent that under the said rule penalty not exceeding the duty on the excisable goods in respect of which the contravention of the nature specified thereunder has been committed or rupees two thousand, which ever is greater can be imposed - Merely because the Tribunal has fallen back upon the provisions of Section 11AC of the Act for the purpose of reducing the penalty to 25% of the amount imposed by the Adjudicating Authority, the same does not give rise to any question of law so as to warrant interference - Appeal is dismissed

Summary

Issues:
1. Interpretation of Section 11AC of the Central Excise Act, 1944 regarding the imposition of mandatory penalty.
2. Justification of the Tribunal's decision to enhance penalty and confirm interest in a case involving central excise duty, interest, and penalty imposition.

Analysis:

Issue 1: Interpretation of Section 11AC of the Central Excise Act
The appellant Revenue challenged an order by the Tribunal, questioning whether Section 11AC of the Act should require mens rea for imposing mandatory penalty and if penalties could be levied below the prescribed minimum. The case involved an appeal against the confirmation of central excise duty, interest, and penalty. The Commissioner [Appeals] set aside interest and penalty based on the duty payment before the show cause notice. The Tribunal partly allowed the appeal by enhancing the penalty to 25% of the duty amount and confirming the interest. The appellant contended that the penalty reduction by the Tribunal under Section 11AC was unjustified, arguing that the duty payment was due to departmental actions, and Section 11AC should not apply as the penalty was imposed under Rule 25 of the Central Excise Rules, 2002.

Issue 2: Tribunal's Decision on Penalty Enhancement and Interest Confirmation
The Tribunal, considering the duty payment before the notice, applied the proviso to Section 11AC and enhanced the penalty to 25% of the duty amount, along with confirming the interest. The Tribunal's decision differed from the Commissioner [Appeals] who had set aside the entire penalty. The appellant argued that since the penalty was imposed under Rule 25 of the Rules, Section 11AC should not be invoked. However, Rule 25 allows discretion in penalty imposition, with the Adjudicating Authority initially imposing a penalty of Rs. 1 lakh, later enhanced by the Tribunal to 25% of the duty amount. The Tribunal's discretion in enhancing the penalty was deemed valid, even if it involved invoking Section 11AC. The Court dismissed the appeal, upholding the Tribunal's decision on penalty enhancement and interest confirmation.

In conclusion, the judgment addressed the interpretation of Section 11AC of the Central Excise Act and the Tribunal's authority in enhancing penalties and confirming interest in cases involving central excise duty. The Court upheld the Tribunal's decision based on the discretion allowed under Rule 25 of the Central Excise Rules and found no legal grounds to interfere with the penalty enhancement to 25% of the duty amount.