2015 (1) TMI 74 - AT - Central Excise

Benefit of proviso to section 11AC - Duty paid before issuance of SCN - Held that - It is not disputed that the appellants had deposited an amount of ₹ 66 lakhs even prior to issuance of show cause notice. The said amount covers the entire duty amount confirmed against the appellant and interest as also penalty of 25% of duty amount. In terms of first proviso to Section 11AC, if the duty determined and interest is paid within 30 days from the date of communication of the order of the Central Excise officers determining such duty, the amount of penalty liable to be paid by such persons under this section shall be 25% of the duty so determined. Inasmuch as the appellant in the present case has deposited the duty prior to confirmation of the same in fact prior to issuance of show cause notice, the said deposits have to be held as satisfying the first proviso to Section 11AC in which case the penalty would get reduced to 25%. Though the appellant have relied upon various decisions of different High Courts in support of his contention, I feel no need to refer to same inasmuch the law itself provides reduction of penalty in the said scenario. Accordingly, penalty on M/s. Intex Technologies is being reduced to 25%. Demand confirmed against them along with interest is however upheld as not contested - No separate penalty to be imposed on the Managing Director of the company - Decided partly in favour of assesse.

Summary

Issues:
Confirmation of duty against the company, Penalty imposition on the Managing Director, Applicability of proviso to Section 11AC, Reduction of penalty to 25%.

Confirmation of Duty:
The adjudicating authority confirmed duty of Rs. 38,15,303 against the company for manufacturing and clearing computers under a specific brand name. The penalty of Rs. 5,00,000 was imposed on the Managing Director. The advocate for the company did not dispute the demand confirmation and interest but argued that since the company had already deposited Rs. 66 lakhs before the show cause notice, the penalty should be reduced to 25% as per the proviso to Section 11AC. The Tribunal upheld the demand and interest but reduced the penalty to 25% in line with the proviso as the duty was paid before the notice was issued, satisfying the conditions for penalty reduction.

Penalty Imposition on Managing Director:
The Tribunal noted that the Managing Director had no specific allegations of mala fide intent to evade duty. Considering that the penalty was already imposed on the company, which promptly deposited the duty even before the notice, the Tribunal decided not to impose any separate penalty on the Managing Director. Thus, the penalty on the Managing Director was set aside.

Applicability of Proviso to Section 11AC:
The Tribunal emphasized that the company's early deposit of duty prior to the issuance of the show cause notice met the conditions of the proviso to Section 11AC. The proviso states that if duty and interest are paid within 30 days of the order determining duty, the penalty can be reduced to 25% of the determined duty. Despite the company citing various High Court decisions, the Tribunal found that the law itself provided for penalty reduction in such scenarios, leading to the penalty reduction for the company.

Reduction of Penalty to 25%:
The Tribunal, based on the early deposit of duty by the company, reduced the penalty to 25% as per the proviso to Section 11AC. The penalty on the company was reduced while the demand and interest were upheld. The Tribunal also decided not to impose any separate penalty on the Managing Director due to the circumstances of the case.

This detailed analysis of the judgment highlights the confirmation of duty, penalty imposition, the application of the proviso to Section 11AC, and the reduction of penalty to 25% for the company, along with the decision to not impose a separate penalty on the Managing Director.