2011 (4) TMI 1063 - HC - Central Excise

Whether Tribunal can reduce the amount of penalty imposed under Section 11AC of the Central Excise Act, 1944 - department submits that in view of the decision of the Supreme Court in the case of Dharamendra Textile Processors and Others, (2008 - TMI - 31520 - SUPREME COURT) , the amount of penalty could not be less than the amount of duty - Held that - penalty amount could not be less than Rs. 10,80,914.36 paisa, the duty, reference is decided accordingly in favour of the revenue and against the assessee.

Summary

Issues:
1. Reduction of penalty under Section 11AC of the Central Excise Act, 1944 when duty confirmed and upheld by the Tribunal.
2. Interpretation of penalty amount under Section 11AC compared to confirmed duty.

Analysis:
1. The Customs, Excise & Service Tax Appellate Tribunal referred questions regarding the reduction of penalty under Section 11AC of the Central Excise Act, 1944 when duty has been confirmed and upheld by the Tribunal. The Tribunal, in a specific case, confirmed duty for clandestine removal of goods but reduced the penalty amount. The issue raised was whether the Tribunal had the authority to reduce the penalty below the confirmed duty amount.

2. The department argued that as per the Supreme Court decision in a relevant case, the penalty amount should not be less than the confirmed duty amount. In this instance, the confirmed duty was Rs. 10,80,914.36 paisa, and the penalty was reduced to Rs. 2.5 lakhs by the Tribunal. The department contended that the penalty should not be less than the duty amount as per the provisions of Section 11AC of the Central Excise Act, 1944.

3. The High Court, after considering the arguments, held in favor of the department. The Court emphasized that the penalty amount cannot be less than the duty amount confirmed under Section 11A(1) of the Central Excise Act, 1944. Therefore, the Court decided that the penalty amount should be at least Rs. 10,80,914.36 paisa, which was the confirmed duty amount in this case. The reference was decided in favor of the revenue and against the assessee, upholding the principle that the penalty cannot be reduced below the confirmed duty amount as per the provisions of the law.

This judgment clarifies the interpretation of penalty amounts under Section 11AC of the Central Excise Act, 1944 and establishes that the penalty imposed should not be less than the confirmed duty amount, even if upheld by the Tribunal.