2011 (7) TMI 598 - AT - Central Excise

Plea for reduction of penalty under first proviso to Section 11AC - Clandestine removal of the goods without payment of duty - Held that - Supreme Court in the case of Rajasthan Spinning & Weaving Mills Ltd. vs. CCE (2009 (5) T.M.I. 15 (SC)) has held that if the elements of Section 11AC are present the penalty under this section would be attracted even if the duty had been paid prior to issue of show cause notice. In such situation penalty u/s 11AC can be reduced when the entire duty confirmed by the adjudicating authority u/s 11A(2) along with interest payable thereon u/s 11AB together with a amount of equal to 25% of duty amount towards penalty is paid within a period of thirty days from the date of adjudication order. In present case appellants have paid duty and 25% of the duty towards penalty within stipulated period the interest on duty has not been paid by them therefore the statutory conditions for availing the benefit of first proviso to Section 11AC have not been fulfilled by the appellants - Decided against the assessee.

Summary

Issues:
- Appeal against Order-in-Appeal No.84/CE/Ldh/2009 dated 31.13.09
- Clandestine removal of goods without payment of duty
- Benefit of reduced penalty under proviso 1 of Section 11AC

Analysis:
1. The appeal was filed against Order-in-Appeal No.84/CE/Ldh/2009 dated 31.13.09 passed by the Commissioner of Central Excise, Chandigarh. The case involved the clandestine removal of goods without payment of duty by the appellants, as confirmed by the records and the statement of the Director of the appellant. A show cause notice was issued proposing a demand of duty, penalty, and interest. The adjudicating authority confirmed the demand and imposed a penalty under Section 11AC of the Central Excise Act, 1944. The appellants sought the benefit of reduced penalty under proviso 1 of Section 11AC, but the Commissioner (Appeals) did not accept it due to non-payment of interest within the stipulated time.

2. The Revenue argued that the appellants were not eligible for the benefit of the first proviso to Section 11AC as the conditions for this benefit were not fulfilled, specifically mentioning that interest had not been paid. The Revenue highlighted that no specific order was required from the Assistant Commissioner for the payment of interest, and fulfilling the duty demand under Section 11AC (2) was necessary for availing the benefits of the provisos under Section 11AC.

3. The Tribunal, after hearing the arguments, found that it was indeed a case of clandestine removal of goods without payment of duty, a fact not disputed by the appellants. Referring to the Supreme Court's decision in Rajasthan Spinning & Weaving Mills Ltd. vs. CCE, the Tribunal emphasized that the penalty under Section 11AC would be attracted even if the duty had been paid before the show cause notice. However, to avail the benefit of the first proviso to Section 11AC, the entire duty, interest, and 25% of the duty towards penalty needed to be paid within the stipulated period. In this case, although the duty and 25% of the penalty were paid on time, the interest on duty was not paid by the appellants, leading to the dismissal of the appeal.

In conclusion, the Tribunal upheld the decision of the Commissioner (Appeals) and dismissed the appeal filed by the appellants due to non-fulfillment of the statutory conditions for availing the benefit of the first proviso to Section 11AC, emphasizing the importance of timely payment of interest along with duty and penalty for such benefits.