2015 (1) TMI 76 - HC - Central Excise

Penalty u/s 11AC - Whether an option of paying 25% of penalty imposed on the appellant under Section 11AC of the Central Excise Act was required to be extended to the appellant and whether the orders of the tribunal declining to extend such option are sustainable in the facts and circumstances of this case - Held that - Provision of reduced penalty aims at reduction in the litigation and ensures that an assessee who accepts the duty demand and pays the same with interest within stipulated time would be granted such a benefit of reduced penalty. However, this Court has taken the view in the past, considering the departmental circulars issued from time to time, that such option should be offered. - Assessee would have an option to pay up the entire duty with interest within 30 days, upon which he would avail the benefit of duty, interest and reduced 1/4th penalty. The question is answered accordingly. Judgment of the tribunal is reversed to that extent. If the appellant deposits before the department unconditionally the entire amount of unpaid duty with interest and 1/4th penalty, the penalty under Section 11 AC of the Central Excise Act shall be reduced to such extent - Decided partly in favour of assesse.

Summary

Issues:
- Whether an option of paying 25% of penalty imposed on the appellant under Section 11AC of the Central Excise Act was required to be extended to the appellant and whether the orders of the tribunal declining to extend such option are sustainable in the facts and circumstances of this case?

Analysis:

Issue 1: Penalty under Section 11AC of the Central Excise Act
The case revolves around the penalty imposed on the appellant-assessee under Section 11AC of the Central Excise Act by the adjudicating authority. The provision allows for a reduction of the penalty to 1/4th if the assessee pays the duty, interest, and reduced penalty within 30 days. The revenue argues that the assessee must exercise this option promptly, while the appellant contends that the option should have been offered even at later stages of the proceedings.

Issue 2: Requirement of Offering Option
The Court acknowledges that the provision of reduced penalty aims to minimize litigation and incentivize timely payment by granting benefits to the assessee who accepts the duty demand. Referring to past judgments and departmental circulars, the Court emphasizes that the option of reduced penalty should be offered to the assessee. Failure to provide this option has led to remands in previous cases, and the Court upholds the necessity of granting the option even if not availed earlier in the proceedings.

Issue 3: Judicial Precedents and Appellate Proceedings
The Court cites a judgment from a prior case where the High Court directed the Tribunal to consider the provisions of Section 11AC and offer the option to pay 25% of the penalty within 30 days. The Tribunal's failure to provide this option led to the Court maintaining that the assessee's case falls under the explanation to Section 11AC. The Court reiterates that the assessee should be given the opportunity to avail the reduced penalty, as established by consistent judicial precedents.

Issue 4: Supreme Court's Dismissal of Appeals
Numerous appeals where similar views were taken by the High Court were escalated to the Supreme Court, which subsequently dismissed all such appeals. This underscores the importance and validity of the interpretation regarding the option to pay reduced penalties under Section 11AC of the Central Excise Act.

Conclusion:
The Court concludes that the appellant should have the option to pay the entire duty with interest within 30 days to benefit from reduced penalties. The judgment of the tribunal is reversed to the extent that the appellant must deposit the entire unpaid duty with interest and 1/4th penalty to avail the reduction under Section 11AC of the Central Excise Act. The appeal is allowed, and the case is disposed of in favor of the appellant.