2011 (2) TMI 1152 - HC - Central Excise

Penalty - assessee claimed exemption from payment of duty on the basis of exemption Notification - Held that - Unless it is held that the duty is leviable the question of going into the correctness of the imposition of penalty or setting aside the order of penalty would not arise - this appeal also has to be carried to the Apex Court along with the appeal preferred by the assessee challenging the levy of duty - Appeal is rejected

Summary

Issues:
Challenge to order imposing penalty under Section 11AC of the Central Excise Act, 1944 as not justifiable; Dispute regarding levy of duty and penalty imposed for non-payment of duty; Availability of exemption claimed by the assessee; Jurisdiction of the Court to review penalty in absence of duty liability.

Analysis:
The High Court heard an appeal by the revenue challenging a Tribunal's order that set aside a penalty under Section 11AC of the Central Excise Act, 1944, deeming it unjustifiable. The Tribunal's decision comprised two aspects: a duty levy dispute and a penalty for non-payment of duty. The appellant, an assessee, sought exemption from duty payment based on a specific notification. The core issue revolved around the eligibility of this claimed exemption. The respondent contended that since no appeal lay against the duty imposition order under Section 35-G, they had appealed to the Apex Court under Section 35-L, which was admitted in 2006. They argued that the penalty's validity hinged on the duty payment obligation, thereby suggesting that the Court couldn't assess the penalty's lawfulness independently or the Tribunal's decision to annul it. Consequently, they urged for the dismissal of the current appeal on grounds of non-maintainability.

The Court emphasized that unless the duty levy was upheld, the assessment of penalty or the annulment of the penalty order would be premature. Therefore, the Court determined that the appeal should be taken to the Apex Court alongside the assessee's appeal challenging the duty imposition. Consequently, the Court rejected the appeal, granting the appellant the liberty to appeal under Section 35-L before the Apex Court. This decision underscored the interdependence of duty liability and penalty imposition, thereby necessitating a holistic approach to resolving the issues at hand.