2010 (9) TMI 802 - HC - Central Excise

Whether penalty under Rule 25 of the Central Excise Rules 2004 read with Section 11AC of the Central Excise Act 1944 is liable to be imposed on the assessee in cases where duty has been deposited by the assessee before issue of show cause notice - duty in question was duly paid before issuance of show cause notice and there is no finding of wilful evasion of the duty Section 11A(2B) of the Act clearly stipulates that if the duty is paid before show cause notice no notice can be served and obviously in absence of any notice no penalty can be imposed Whether penalty under Section 11AC is liable to be imposed on the assessee equal to the amount of duty confirmed under Section 11A on merit which fall under the purview of explanation to sub-section (2B) of Section 11A of the Central Excise Act 1944 where duty has been deposited before issue of show cause notice - duty was paid before issuance of show cause notice penalty set aside both the appeals are dismissed.

Summary

Issues:
1. Whether penalty is justified when the assessee has already paid the short paid duty and there is no mens rea attracting levy of penalty.

Analysis:
The judgment by the High Court of Punjab & Haryana involved the disposal of two appeals, CEA Nos. 12 and 82 of 2007, concerning the imposition of penalties on the assessee for non-payment of duty. The central question in both appeals was whether the penalty would be justified when the assessee had already paid the short paid duty and there was no mens rea attracting the levy of penalty. In CEA No. 12 of 2007, the issue raised was whether the penalty under Rule 25 of the Central Excise Rules, 2004, read with Section 11AC of the Central Excise Act, 1944, could be imposed on the assessee when the duty had been deposited before the issuance of a show cause notice. The Court noted that the duty in question was duly paid before the show cause notice was issued, and there was no finding of willful evasion of duty. As per Section 11A(2B) of the Act, if duty is paid before the show cause notice, no penalty can be imposed as no notice can be served in the absence of any notice.

Moving on to CEA No. 82 of 2007, the question raised was whether the penalty under Section 11AC could be imposed on the assessee equal to the amount of duty confirmed under Section 11A on merit, where duty had been deposited before the issue of a show cause notice. The Court observed that since the duty was paid before the issuance of the show cause notice, the situation mirrored that of CEA No. 12 of 2007. Consequently, the Tribunal was justified in dismissing the appeal of the revenue against the setting aside of the penalty in both cases. Therefore, the High Court, comprising Adarsh Kumar Goel and Ajay Kumar Mittal, JJ., dismissed both appeals, affirming the Tribunal's decisions in setting aside the penalties imposed on the assessee in the absence of mens rea and with the duty being paid before the issuance of show cause notices.