2012 (11) TMI 913 - HC - Central Excise

Penalty imposed under Section 11AC of the Central Excise Act alleged that assessee has clandestinely removed the finished goods Held that - Assessing Officer straightway proceeded to pass the order of imposition of penalty under Section 11AC of the Act of 1944 without recording any reasons and finding with respect to the intention of the assessee which entails the assessee for the penalty under Section 11AC of the Act of 1944 - violation must be with intent to evade payment of duty and that is the question of fact which alone could have been the foundational fact for imposition of penalty. Such finding is not recorded by the Assessing Officer nor an inference can be drawn from the reasons given in the order impugned of the Assessing Officer so as to draw inference that the action of the assessee was intentional in favor of assessee

Summary

Issues:
1. Imposition of penalty under Section 11AC of the Central Excise Act, 1944 challenged by the appellant.
2. Allegation of error in the Tribunal's decision and Assessment Order regarding clandestine removal of finished goods.
3. Lack of finding on the intention of the assessee for penalty under Section 11AC of the Act of 1944.

Analysis:
The High Court addressed the issue of the imposition of a penalty under Section 11AC of the Central Excise Act, 1944. The appellant-revenue challenged the order of the Customs, Excise & Service Tax Appellate Tribunal, Kolkata, which had set aside the penalty of Rs. 2,25,235 imposed on the assessee. The court noted the appellant's contention that the Tribunal erred in its assumptions and findings, particularly regarding the clandestine removal of finished goods. The Assessing Officer had found a shortage of goods, suggesting possible removal, but proceeded to impose the penalty without establishing the intentional evasion of duty, a crucial requirement under Section 11AC. The court emphasized that the imposition of the penalty must be based on the intentional evasion of duty, which was not adequately evidenced in the Assessing Officer's order. Therefore, the court dismissed the appeal, finding no merit in the appellant's arguments.

In the detailed analysis, the court highlighted the importance of establishing intent to evade duty as a foundational fact for imposing penalties under Section 11AC. The Assessing Officer's failure to provide clear reasoning or findings on the intentional evasion by the assessee was a critical flaw in the imposition of the penalty. The court emphasized that mere shortage of goods, without a clear link to intentional evasion, was insufficient to justify the penalty under the Act. The court's decision underscored the necessity of a factual basis demonstrating deliberate intent to evade duty, which was lacking in the case at hand. Consequently, the court upheld the Tribunal's decision to set aside the penalty, as the evidence did not support the imposition of penalties under Section 11AC without establishing intent to evade duty.

In conclusion, the High Court's judgment focused on the legal requirement of proving intentional evasion of duty for imposing penalties under Section 11AC of the Central Excise Act, 1944. The court found that the Assessing Officer's order lacked sufficient evidence or findings to establish the necessary intent on the part of the assessee to evade duty. As a result, the court dismissed the appeal, upholding the Tribunal's decision to set aside the penalty imposed on the assessee. The judgment serves as a reminder of the stringent requirements for imposing penalties under the Act and the importance of establishing deliberate intent to evade duty before penalizing taxpayers.