2010 (2) TMI 829 - HC - Central Excise

Penalty under proviso to Section 11AC - Tribunal cannot be said to be a non-speaking and non-reasoned order - penalty levied under Section 11AC and when the duty amount is paid before issuance of show cause notice, the penalty is reduced to 25% of the duty amount, If the duty amount with interest is not paid in time and even reduced penalty of 25% of the duty amount is not paid in time and option is not given to the respondent-assessee, such option should be given to the assessee and period of 30 days would commence from the date of giving such option, Tax Appeal stands dismissed.

Summary

Issues:
1. Reduction of penalty under Section 11AC of the Central Excise Act, 1944.
2. Compliance with preconditions for benefit of reduced penalty.
3. Obligation of adjudicating authority to mention reduced penalty provisions.
4. Justification of reducing penalty to 25% of the duty amount.
5. Compliance with statutory obligations regarding penalty and interest calculation.

Analysis:
1. The case involved a Tax Appeal under Section 35G of the Central Excise Act, 1944, questioning the reduction of mandatory penalty despite confirming duty on clandestine removal and evasion of Central Excise duty. The appellant argued that the Tribunal mechanically extended the benefit of reduced penalty without proper reasoning. The appellant highlighted the lack of evidence regarding the date of duty payment by the respondent.
2. The appellant contended that the respondent did not meet the preconditions for availing the benefit of reduced penalty under Section 11AC. It was argued that the duty amount was not paid with interest, and the reduced penalty was not deposited within the specified time frame.
3. The issue of the adjudicating authority's obligation to mention the availability of reduced penalty under Section 11AC was raised. The appellant cited a Circular by the Central Excise Department mandating the inclusion of reduced penalty provisions in the order-in-original. The appellant emphasized the importance of clearly outlining the option for reduced penalty in the adjudication order.
4. The appellant challenged the Tribunal's decision to reduce the penalty to 25% of the duty amount, arguing that the respondent failed to comply with the preconditions for such a reduction. The appellant relied on various judgments to support the contention that penalty should be equivalent to the duty liability.
5. The court analyzed the arguments and previous judgments, concluding that the Tribunal's order was justified in reducing the penalty to 25% of the duty amount. The court emphasized the importance of complying with statutory obligations and providing clear options for reduced penalty within the specified time frame. The court dismissed the Tax Appeal, subject to the clarification regarding compliance with preconditions for reduced penalty.