2011 (2) TMI 388 - HC - Customs

Quantum of penalty - the respondent-assessee did not pay the penalty within the time stipulated in the second proviso the adjudicating authorities had no discreation of imposing lesser penalty or to reduce the penalty under Section 11-AC than the amount of duty determined under Section 11-A of the Central Excise Act 1944 - It is thus clear that reduction of penalty without verifying whether the penalty was paid within 30 days as contemplated by the second proviso was wrong and illegal and hence deserves to be set aside - the Appeal is allowed but with no order as to costs.

Summary

Issues:
Whether adjudicating authorities have discretion to impose lesser penalty under Section 11-AC than the duty determined under Section 11-A of the Central Excise Act, 1944?

Analysis:
The High Court examined an appeal filed by the revenue concerning the discretion of adjudicating authorities to reduce penalties under Section 11-AC compared to the duty determined under Section 11-A of the Central Excise Act, 1944. The Tribunal had rejected the revenue's appeal and upheld the Commissioner (Appeals) order. The Court noted that despite clear evidence of duty suppression and intent to evade duty, the penalty imposed was reduced to Rs. 35,000 due to the payment of duty and interest within the stipulated time under the first proviso of Section 11-AC.

The Court thoroughly reviewed the orders, show cause notice, and evidence on record, concluding that the findings on duty suppression and intent to evade were well-supported and not perverse. Therefore, the Court found no grounds to interfere with these findings. The first proviso to Section 11-AC allows for a reduced penalty if duty and interest are paid within 30 days of the order determining duty. In this case, the duty and interest were paid within the time frame, but the penalty was not. The Court emphasized that the second proviso to Section 11-AC would then apply, making the respondent liable to pay a penalty equal to the duty as per Section 11-AC.

The Court held that the reduction of penalty without verifying compliance with the second proviso was incorrect and unlawful. Consequently, the Court set aside the judgments of the Tribunal and Commissioner (Appeals). The Court answered the issue raised in the negative, favoring the appellant-revenue over the respondent-assessee. As a result, the appeal was allowed with no order as to costs.