2011 (9) TMI 12 - HC - Central Excise

Penalty - section 11AC - The officers of the Anti-Evasion Branch recorded the statement of the driver, and thereafter, conducted a raid at the premises of the respondent. In the raid it was found that finished goods, as well as the raw-material, were short in comparison to the last recorded balances in RG-1 register - In the raid it was found that finished goods, as well as the raw-material, were short in comparison to the last recorded balances in RG-1 register - mandatory penalty can not be reduced below minimum.

Summary

Issues:
1. Reduction of penalty by Customs Excise and Service Tax Appellate Tribunal (CESTAT) below re-quantified duty amount.

Analysis:

Issue 1: Reduction of penalty by CESTAT below re-quantified duty amount

The case involved a situation where the respondent was proceeded ex-parte as there was no appearance on their behalf despite multiple opportunities. The main question of law raised by the revenue was whether CESTAT erred in reducing the penalty below the re-quantified duty amount, disregarding Section 11AC of the Central Excise Act, 1944. The facts of the case indicated that during a cordon and search exercise, a vehicle loaded with goods was intercepted, leading to a raid at the respondent's premises where discrepancies were found in the inventory compared to the records. Consequently, a show cause notice was issued, and penalties were imposed by the authorities at different stages of adjudication.

The matter escalated to CESTAT, which, in its judgment, sustained the lower authorities' decision but modified the duty quantification methodology, resulting in a reduced duty amount and a penalty of 2 lakhs. The revenue contended that such reduction of penalty below the duty amount evaded was not in line with legal provisions and relied on various judgments to support its argument, including those of the Supreme Court and the Bombay High Court. The court, after considering the precedents and legal provisions, agreed with the revenue's stance. It highlighted the stringent nature of penalty provisions under Section 11AC for intentional duty evasion, emphasizing the lack of discretion in imposing a penalty different from the evaded duty amount. The court, therefore, answered the question in favor of the revenue, allowing the appeal and setting aside CESTAT's order to the extent that the penalty was reduced below the quantified duty evasion amount.

In conclusion, the court's decision upheld the principle that penalties under Section 11AC are stringent and must correspond to the duty amount evaded intentionally, as established by legal precedents and the specific provisions of the Central Excise Act, 1944. The judgment serves as a reminder of the strict consequences for deliberate duty evasion and reinforces the authority's obligation to impose penalties commensurate with the gravity of the offense.