2014 (7) TMI 733 - AT - Central Excise

Penalty u/s 11AC and 11AB - Held that - Commissioner (Appeals) set aside the demand of interest and penalty on the ground that the respondent paid the duty before issue of the show-cause notice. The Supreme Court in the case of Union of India Vs Rajasthan Spinning and Weaving Mills reported in 2009 (5) TMI 15 - SUPREME COURT OF INDIA held that penalty under Section 11AC of the Act cannot be set aside merely on the ground that duty was paid before issue of the show-cause notice. On perusal of the impugned order, I find that the main contention of the respondent was that they have paid the duty before the issue of the show-cause notice and, therefore, penalty is not sustainable. It is seen that the respondent had not contested penalty and interest on merit. As the respondent had not contested penalty and interest on merit and in view of the decision of the Hon ble Supreme Court, the imposition of penalty and demand of interest is sustainable. - Decided in favour of Revenue.

Summary

Issues:
Appeal against setting aside penalty and interest under Section 11AC and 11AB of the Central Excise Act, 1944.

Analysis:
The case involved an appeal by the Revenue against the order of the Commissioner (Appeals) where penalty and interest imposed on the respondent under Section 11AC and 11AB of the Central Excise Act, 1944 were set aside. The respondent, engaged in manufacturing iron and steel products, had a visit from Central Excise officers who seized incriminating documents and issued a show-cause notice proposing a duty demand. The appellant paid the duty before the notice was issued. The Adjudicating authority confirmed the duty demand, appropriated the amount paid, and imposed a penalty of Rs. 10,000 under Rule 25 of the Central Excise Rules, 2002 read with Section 11AC of the Act, along with interest under Section 11AB. The respondent appealed, and the Commissioner (Appeals) set aside the penalty and interest.

Upon review, the Tribunal noted that the Commissioner (Appeals) set aside the penalty and interest based on the respondent paying the duty before the show-cause notice. Citing a Supreme Court case, it was highlighted that penalty under Section 11AC cannot be set aside solely due to pre-notice duty payment. The Tribunal observed that the respondent did not contest the penalty and interest on merit but rather focused on the timing of duty payment. As the respondent did not challenge the penalty and interest on substantive grounds and considering the Supreme Court's decision, the Tribunal found the imposition of penalty and interest to be valid.

Consequently, the Tribunal set aside the Commissioner (Appeals) order and reinstated the original authority's decision, allowing the Revenue's appeal. The judgment emphasized the importance of contesting penalties and interest on substantive grounds rather than solely relying on the timing of duty payments to avoid such liabilities.