2013 (3) TMI 281 - HC - Central Excise

Seeking option of paying 25% of penalty under Section 11AC of the Central Excise Act, 1944 - Held that - Order-in-Original came to be passed on 22-2-2006. Admittedly, at that point of time the benefit of the proviso was not given to the applicant. The applicant in its appeal before the Commissioner (Appeals), did not make any grievance with regard to non-grant of the said benefit, nor did it deposit the amount of duty with interest and 25% of the penalty as envisaged under the said proviso within a period of thirty days from the date of communication of the Order-in-Original. Under the circumstances, the said point was never at issue in the appeal before the Commissioner (Appeals). In the appeal before the Tribunal against the order of the Commissioner (Appeals) also, the said contention does not appear to have been raised and the order of the adjudicating authority as confirmed by the Commissioner (Appeals), appears to have been assailed only on the point of limitation. Thus, such issue never came up for consideration either before the Commissioner (Appeals) or the Tribunal. Since such issue was never raised before the Tribunal, there is no discussion in this regard in the order of the Tribunal. Consequently, such question did not arise out of the impugned order of the Tribunal and as a natural corollary, no such question was framed by this court while admitting the appeal and deciding the same. Even before this court, such issue was never raised nor was any request made for framing a question of law in this regard. No request was made for grant of the benefit under the proviso to Section 11AC of the Act at the time when the appeal was being allowed. Under the circumstances, no such relief had been granted to the applicant. The said issue is, therefore, a debatable one. Thus, the relief claimed by the applicant in the present application involves a debatable issue as to whether such relief could be granted by the court in a tax appeal wherein no question of law had been formulated in respect of the issue involved in the present case. Thus, the said decisions have been rendered in appeals wherein such controversy was directly in issue, which is not so in the facts of the present case. Under the circumstances, in the light of the provisions of Section 35G of the Act and more particularly, sub-section (4) thereof, which postulates that the appeal shall be heard only on the question so formulated, this court is of the view that the applicant is not entitled to the relief prayed for in the present application.

Summary

Issues Involved:
1. Whether the Tribunal was justified in importing the concept of knowledge in the provisions of Section 11A of the Central Excise Act, 1944.
2. Whether the applicant is entitled to the option of paying 25% of the penalty under Section 11AC of the Central Excise Act, 1944.

Issue-wise Detailed Analysis:

1. Justification of the Tribunal's Importing the Concept of Knowledge in Section 11A of the Central Excise Act, 1944:
The Court examined whether the Tribunal correctly applied the concept of knowledge under Section 11A of the Central Excise Act, 1944. The Tribunal had allowed the appeal on the ground of limitation, holding that the show cause notice was issued beyond six months from the date of knowledge. The High Court, however, found that suppression was admitted by the assessee and established by evidence. Therefore, the proviso to sub-section (1) of Section 11A was applicable, and the Tribunal was not justified in holding the notice as time-barred. Consequently, the Tribunal's order was quashed, and the appeal was allowed.

2. Entitlement to the Option of Paying 25% Penalty under Section 11AC of the Central Excise Act, 1944:
The applicant argued that the penalty imposed did not consider the option to pay 25% of the penalty amount as per Section 11AC. The original adjudicating authority and the Commissioner (Appeals) did not extend this option. The Tribunal allowed the appeal on other grounds, so the issue of penalty was not addressed. The applicant contended that the benefit of paying 25% penalty should be granted as they had paid the duty, interest, and 25% of the penalty within the stipulated time. The Court noted that this issue was not raised before the lower authorities or the Tribunal, nor was it formulated as a substantial question of law in the High Court appeal. The Court emphasized that such relief involves a debatable issue and cannot be granted in the absence of a formulated question of law. The Court also distinguished this case from others where the issue was directly in question. Consequently, the application for the benefit of paying 25% penalty was rejected.

Conclusion:
The High Court concluded that the Tribunal erred in applying the concept of knowledge under Section 11A, and the show cause notice was not time-barred. The Court also held that the applicant was not entitled to the option of paying 25% of the penalty under Section 11AC as the issue was not raised at the appropriate stages and was not a formulated question of law in the appeal. The application was thus rejected, and the rule was discharged with no order as to costs.