2007 (7) TMI 70 - AT - Central Excise

Penalty - Appellant contended that maximum liability to pay penalty can t exceed more than 25% of the duty when the amount deposited earlier than the issuance of SCN - Held that appellant contention was correct and reduced the penalty subsequently

Summary

Issues:
1. Imposition of penalties on respondents under the order-in-original.
2. Validity of setting aside penalties by the Appellate Authority.
3. Separate penalty imposition on partner of the Partnership Firm.
4. Interpretation of Section 11AC and Rules 25 and 26 of the Central Excise Rules, 2001.
5. Application of the first proviso to Section 11AC in penalty determination.
6. Liability of partner in penalty payment.

Analysis:
1. The appeals were filed against penalties imposed on the respondents under the order-in-original. The penalties were set aside by the Commissioner (Appeals) as respondent No. 1 had paid the full duty amount and penalty, and respondent No. 2 had also paid the full penalty amount.

2. The Revenue contended that penalties equal to the duty were correctly imposed on the Partnership Firm, and the Appellate Authority had no valid reason to set them aside. Referring to precedent, the Revenue argued for separate penalties on the partner under Rule 26. The Larger Bench decision emphasized that penalties under Section 11AC cannot be reduced except as provided in the first proviso.

3. The respondents argued that there was no intention to evade duty in the show cause notice, and the duty and penalty were paid before the notice was issued. They contended that interest payment was not required as duty liability was detected promptly. Citing a Tribunal decision, they argued for the adjustment of the paid amount as timely payment.

4. The evidence revealed clandestine activities by the firm, leading to shortages and evasion of excise duty. The provisions of Rules 25 and 26 were analyzed in light of Section 11AC, emphasizing the intent to evade duty as a crucial factor in penalty determination. The first proviso to Section 11AC was examined in the context of early payment benefits.

5. The first proviso to Section 11AC allows for reduced penalty if duty and interest are paid within 30 days of the order. This provision applies even in cases without mens rea, covering contraventions of Act and Rules. The benefit of early payment extends to cases where penalties are imposed under Rule 25, subject to meeting the proviso's requirements.

6. The penalty on the Partnership Firm was reduced based on the duty paid and adjusted against the confirmed demand. The partner's liability under Rule 26 was noted, but since the firm was penalized, no separate penalty was imposed on the partner, who would be jointly liable with other partners. The appeals were disposed of accordingly.