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2013 (3) TMI 338 - HC - Central ExciseWhether the appellate Tribunal could reduce the penalty amount, which is less than the amount of penalty specified under section 11 AC of the Central Excise Act, 1944 - Mandatory penalty u/s 11AC - Held that - The decision in Dharamendra Textile 2008 (9) TMI 52 - SUPREME COURT must be understood to mean that though the application of Section 11AC would depend upon the existence or otherwise of the conditions expressly stated in the section, once the section is applicable in a case the concerned authority would have no discretion in quantifying the amount and penalty must be imposed equal to the duty determined under Sub-section (2) of Section 11A. That is what Dharamendra Textile decides. From the proposition as laid down in above cases, it can be concluded that the quantum of the penalty equal to the duty determined as contemplated by Section 11AC is mandatory and there is no discretion in the adjudicating authority or the Tribunal to impose different amount of penalty. In a case where penalty is leviable under section 11AC on fulfilment of the conditions as enumerated in Section 11AC, the penalty equal to the amount of duty determined is mandatory and there is no discretion in the Tribunal to reduce the said penalty. However, as laid down by the apex Court in Union of India Vs. Rajasthan Spinning and Weaving Mills (2009 (5) TMI 15 - SUPREME COURT OF INDIA), the penalty under section 11AC can be imposed only when conditions mentioned in Section 11AC exist. The authorities have no discretion in fixing the quantum of penalty and penalty equal to the duty must be imposed once section 11Ac is made applicable. The question of law is answered in favour of the revenue as the appellate Tribunal had no discretion to reduce the amount of penalty as specified under section 11 AC.
Issues Involved:
1. Whether the appellate Tribunal could reduce the penalty amount, which is less than the amount of penalty specified under section 11AC of the Central Excise Act, 1944. Issue-Wise Detailed Analysis: Issue 1: Reduction of Penalty by the Tribunal The appeal under section 35G(2) of the Central Excise Act, 1944, challenges the judgment and order dated 20.7.2004, passed by the Custom Excise and Service Tax Appellate Tribunal. The substantial question of law is whether the Tribunal could reduce the penalty amount below the amount specified under section 11AC of the Central Excise Act, 1944. Facts of the Case: The case involves M/s Majestic Auto Ltd., engaged in manufacturing two-wheelers. During a surprise visit by Central Excise Officers on 10.1.2011, discrepancies in stock were found: 276 two-wheelers in excess and 365 two-wheelers short. A Panchnama was prepared, and the excess goods were seized but later released on bond with a bank guarantee. A show-cause notice was issued on 8.7.2001, leading to the following actions: - Confiscation of 276 excess two-wheelers. - Recovery of duty amounting to Rs. 6,23,391 and automobile Cess of Rs. 4870 for the shortfall of 365 two-wheelers. - Imposition of interest under section 11AB. - Imposition of penalty under rule 173Q of CEA, 1994. The adjudicating officer confirmed the demand and imposed a penalty equal to the duty amount. The Commissioner of Appeals upheld this decision. However, the Tribunal reduced the redemption fine to Rs. 2 lacs and the penalty to Rs. 3 lacs. Contentions: - The appellant contended that the Tribunal erred in reducing the penalty, arguing that under section 11AC, the imposition of a penalty equal to the duties determined is mandatory, leaving no discretion for reduction. - The respondent argued that the Tribunal had the power to reduce the penalty for good and sufficient reasons, emphasizing that the imposition of penalty is not mandatory unless conditions under section 11AC are fulfilled. Legal Provisions and Interpretation: Section 11AC of the Central Excise Act, 1944, mandates a penalty equal to the duty determined if non-levy or short-levy of duty is due to fraud, collusion, wilful misstatement, or suppression of facts. The provision allows for a reduced penalty of 25% if the duty and interest are paid within 30 days of the order. Judicial Precedents: - In Zunjarrao Bhikaji Nagarkar Vs. Union of India, the Supreme Court held that imposition of penalty under section 11AC is not discretionary. - In Union of India Vs. Dharmendra Textile Processors, the Supreme Court clarified that there is no discretion in imposing the penalty under section 11AC once conditions are met. - In Union of India Vs. Rajasthan Spinning & Weaving Mills, the Court reiterated that penalty under section 11AC is mandatory if conditions are fulfilled, leaving no discretion in the quantum of penalty. Conclusion: The court concluded that the appellate Tribunal had no discretion to reduce the penalty amount specified under section 11AC. The statutory scheme mandates a penalty equal to the duty determined when conditions under section 11AC are met. The reduction of penalty by the Tribunal was contrary to the statutory provisions and principles of statutory interpretation. The appeal was allowed, and the question of law was answered in favor of the revenue, asserting that the Tribunal had no discretion to reduce the penalty amount specified under section 11AC. Parties were to bear their own costs.
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