2014 (5) TMI 297 - HC - Central Excise

Levy of penalty u/s 11AC - demand of interest - The Tribunal by its order dated 20th March, 2006 held that since the amount of duty was already paid before issuance of the show-cause notice, the penalty and interest was not payable. - Held that - When the Tribunal was specifically directed to consider said decisions by an order of this Court, the Tribunal was duty bound to consider the same and render its decision with reference to and in light of the law laid down by the Apex Court. When a lower Court or quasi-judicial authority or the Tribunal is directed by the High Court to decide a question in a particular manner or with reference to a particular decision, such lower court or authority would be required to decide the issue in that manner only. The cryptic approach, as is reflected from the impugned order, cannot be justified. It is always permissible for the Tribunal to take a particular view and arrive at its own conclusion, however, the order it may pass has to be in conformity with the directions issued by this Court while remanding the matter. It is deemed appropriate that the matter is again remanded to the Tribunal for passing a fresh order - decided in favor of revenue.

Issues:
1. Interpretation of penalty under Section 11AC of the Central Excise Act, 1944.
2. Applicability of penalty when duty is paid before issuance of show-cause notice.
3. Consideration of Apex Court judgments in determining penalty imposition.

Analysis:

Issue 1: Interpretation of penalty under Section 11AC
The case involved a dispute regarding the imposition of penalty under Section 11AC of the Central Excise Act, 1944. The respondent, engaged in manufacturing excisable goods, faced a shortage of finished goods during a physical verification. The authorities alleged evasion of excise duty due to discrepancies in stock. The Assistant Commissioner imposed a penalty equivalent to the duty amount under Section 11AC, along with interest. However, the Tribunal, in its initial order, set aside the penalty and interest as the duty had been paid before the show-cause notice was issued. The Tribunal reasoned that penalty under Section 11AC was not imposable in cases where duty was paid before the notice, citing relevant legal precedents.

Issue 2: Applicability of penalty when duty is paid before issuance of show-cause notice
The High Court remanded the matter back to the Tribunal to reconsider the applicability of Section 11AC in light of Apex Court judgments. The Tribunal, in its subsequent order, reiterated that since the duty was paid before the show-cause notice, penalty under Section 11AC was not warranted. The Tribunal emphasized that no investigation was conducted to establish clandestine removal, and therefore, the penalty was not imposable. The Court acknowledged the legal position that in cases of admitted shortages without evidence of clandestine removal, penalty under Section 11AC may not be applicable.

Issue 3: Consideration of Apex Court judgments in determining penalty imposition
The Court observed that the Tribunal failed to adequately consider the directions of the High Court regarding the Apex Court judgments in the case of Dharamendra Textile Processors and Rajasthan Spinning and Weaving Mills. The Court emphasized that when directed to consider specific decisions, the Tribunal must render its decision in accordance with the law laid down by the Apex Court. The Court found the Tribunal's approach to be lacking in addressing the specific directives given by the High Court. Consequently, the Court remanded the matter back to the Tribunal for a fresh decision in compliance with the directives provided, allowing both parties an opportunity to present their case.

In conclusion, the judgment focused on the interpretation of penalty provisions under Section 11AC of the Central Excise Act, emphasizing the importance of considering legal precedents and specific directives from higher courts in determining the imposition of penalties in excise duty cases.

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