2011 (9) TMI 128 - HC - Central Excise

Penalty u/s 11AC - reducing the penalty leviable under Section 11AC - when evasion of duty by the unit had been established - Held that - in view of the judgment of the Supreme Court in the case of Dharmendra Textile (2008 -TMI - 31520 - SUPREME COURT ), the Tribunal had no discretion to reduce the penalty,

Summary

Issues:
- Application for early hearing based on Supreme Court judgment
- Questions of law framed for adjudication
- Reduction of penalty under Section 11AC
- Justification for deleting penalty against proprietor
- Early hearing application and service of respondent
- Facts related to evasion of duty and penalty imposition
- Adjudication order by Commissioner of Central Excise
- Tribunal's judgment on duty payment and penalty reduction
- Discretion of Tribunal in reducing penalty
- Applicability of Supreme Court judgments
- Decision on questions of law and appeal outcome

Analysis:

The judgment involves an application for early hearing based on a Supreme Court precedent, where the questions of law were framed for adjudication regarding the reduction of penalty under Section 11AC of the Central Excise Act, 1944. The appeal by the revenue was against the Customs, Excise and Service Tax Appellate Tribunal's judgment, which had reduced the penalty levied against the unit and deleted the penalty against the proprietor. The Tribunal had framed questions regarding the justification for reducing the penalty and deleting the penalty against the proprietor.

The facts of the case revolved around the evasion of duty by the assessee, who was engaged in manufacturing car stereos without the necessary central excise registration, leading to the clearance of goods without payment of duty. The Central Excise officers raided the premises and seized car stereos, leading to the issuance of a show cause notice for duty recovery, penalty imposition, and interest charges. The Commissioner of Central Excise passed an adjudication order imposing duty, penalty, and interest, which was challenged through appeals to the Tribunal.

The Tribunal's judgment upheld the duty payment requirement but reduced the penalty imposed on the unit while setting aside the penalty on the proprietor. The revenue contended that the Tribunal had no discretion to reduce the penalty, citing Supreme Court precedents. The High Court, in line with previous judgments, held that the Tribunal lacked the discretion to reduce the penalty under Section 11AC, thereby allowing the revenue's appeal and setting aside the Tribunal's order on penalty reduction.

In conclusion, the High Court's decision clarified the Tribunal's limited discretion in reducing penalties under Section 11AC, aligning with established legal principles and Supreme Court interpretations. The appeal outcome favored the revenue, setting aside the penalty reduction and emphasizing the stringent nature of penalty provisions in cases of intentional duty evasion.