2012 (10) TMI 939 - AT - Central Excise

Option given by the Commissioner (A) to pay 25% of the duty demanded as penalty if the duty, interest and penalty are paid within 30 days of his order - Jurisdiction of Tribunal - whether in a situation like this, the Tribunal can extend the benefit or not - Held that - The fact remains that the Original Adjudicating Authority did not incorporate the provisions of Section 11AC providing for reduced penalty in his order. The Commissioner (Appeals) wrongly reduced the penalty instead of giving option which was the proper procedure to follow. In such a situation, the obvious conclusion is that reduction of penalty by the Commissioner in the impugned order is wrong and required to be set aside. At the same time, following earlier decision of the Tribunal in 2009 (7) TMI 1038 - CESTAT AHMEDABAD wherein the Tribunal has extended benefit of payment of reduced penalty where such option was not given, in this case also such an option has to be extended. In the facts of this case wherein entire amount of wrong credit demanded with interest and penalty to the extent of 25% of wrong credit has already been paid, the same has to be held as discharge of full liability - Decided against Revenue.

Summary

Issues:
- Appeal against the option to pay reduced penalty
- Authority to extend the option to pay reduced penalty
- Payment of penalty beyond the stipulated period

Analysis:

1. The main issue in this judgment revolves around the appeal against the option given by the Commissioner (A) to pay 25% of the duty demanded as penalty within 30 days of the order. The Revenue contested this option, arguing that the penalty should not have been reduced and that only the Original Adjudicating Authority could have extended such an option.

2. The Tribunal, under the judgment delivered by B.S.V. Murthy, acknowledged the Revenue's argument that the Commissioner exceeded his powers by reducing the penalty to 25% of the inadmissible credit demanded. The Tribunal noted that the penalty to the extent of 100% duty demanded is mandatory. However, the Tribunal also cited a previous case, Swati Chemicals Industries Ltd., where it was held that the option to pay reduced penalty, duty, interest, and penalty within 30 days of the order can be extended at the appellate stage if not done by the authority.

3. Another aspect considered was the situation where the Assessee had paid the incorrect Cenvat Credit demanded, interest, but the penalty of 25% reduced was paid beyond the one-month period. The Tribunal deliberated on whether it could extend the benefit in such a scenario. It was noted that the Original Adjudicating Authority did not incorporate the provisions of Section 11AC in the order, and the Commissioner (Appeals) wrongly reduced the penalty instead of providing the option as required.

4. The conclusion reached by the Tribunal was that the reduction of penalty by the Commissioner was incorrect and needed to be set aside. Following precedent, the Tribunal extended the benefit of payment of reduced penalty where the option was not given initially. In this case, where the entire amount of the wrong credit demanded with interest and a penalty of 25% had been paid, it was deemed as the discharge of full liability. Consequently, the Appeal filed by the Revenue was disposed of accordingly.