2011 (4) TMI 617 - AT - Central Excise

Demand - Penalty - there was no reason for seeking to read Section 11AC and Section 35 together and harmonising them, because the provisions and construction of both the sections are totally different - whether it was right on the part of the Commissioner (Appeal) to modify the order in original to provide for reduced penalty - In the case of the same assessee, the single member bench of the Tribunal vide its order No. A/1357/WZB/AHD/2010 dated 03.09.2010, set-aside the impugned order and remanded the matter back by observing that I set aside the impugned order and remand the matter to Assistant Commissioner to verify the fact of payment of duty on the final product and to arrive at a finding as to whether the same is equivalent to the modvat credit availed by them or not - Prima facie, it is therefore seen that the facts and details of payment have to be verified for deciding the applicability of reduced penalty - Decided in favour of the assessee by way of remand to Commissioner (Appeal)

Summary

Issues:
1. Appeal against order of Commissioner (Appeal) regarding reduced penalty on fraudulent credit.
2. Interpretation of Sections 11AC and 35F of the Central Excise Act.
3. Verification of payment details for applicability of reduced penalty.

Analysis:

The judgment involves an appeal by the Commissioner of Central Excise and Customs against the order of the Commissioner (Appeal) in a case of fraudulent credit involving M/s. Devi Darshan Processors and M/s. Ansal Synthetics. The issue at hand is whether the Commissioner (Appeal) was justified in modifying the original order to provide for a reduced penalty. The Commissioner (Appeal) had reduced the penalty to 25% on the condition that duty demanded, interest, and the reduced penalty are paid within 30 days. However, the appellate tribunal found obscurity in this decision and referred to a previous case where a similar order was set aside for further verification. The tribunal emphasized the need to verify the payment details to determine the applicability of the reduced penalty. Consequently, the tribunal remanded the matter back to the Commissioner (Appeal) for additional verification and appropriate action without expressing any opinion on the merits of the case.

Another significant issue raised in the appeal was the interpretation of Sections 11AC and 35F of the Central Excise Act. The Revenue contended that the Commissioner (Appeal) erred in allowing the reduced penalty and providing the option to pay 25% of the mandatory penalty. The appeal argued that there was no basis for harmonizing the two sections as they serve different purposes. Section 11AC mandates payment of duty, interest, and a penalty of 25%, while Section 35F pertains to the appeal procedure and the requirement to deposit duty and penalty. The tribunal noted the liberty provided by the provisos to Section 11AC for relief from penalty if the option is availed within 30 days, highlighting the distinct provisions and construction of the two sections.

In conclusion, the appellate tribunal's judgment focused on the issues of reduced penalty in cases of fraudulent credit and the interpretation of relevant sections of the Central Excise Act. The decision underscores the importance of verifying payment details before applying reduced penalties and clarifies the distinct purposes and provisions of Sections 11AC and 35F in the context of duty, interest, and penalty obligations.