2015 (1) TMI 897 - HC - Central Excise

Penalty u/s 11AC - Whether the Tribunal is correct in reducing penalty equivalent to 100% of duty evaded under Section 11AC of the CEA, 1944 and whether the Tribunal is empowered to do so - Held that - Tribunal cannot be upheld in view of the decision of the Apex Court in the case of Union of India v. Dharmendra Textile Processors, 2008 (9) TMI 52 - SUPREME COURT wherein it has been held that penalty imposed under the aforesaid Rule and Section is mandatory penalty and lesser penalty could not be imposed nor any discretion is available to the Tribunal or any other Authority to reduce the quantum of penalty. - Decided in favour of Revenue.

Summary

Issues:
Challenge to reduction of penalty under Section 11AC of the Central Excise Act, 1944 by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT).

Analysis:
The High Court heard the appeal challenging the judgment and order passed by the CESTAT reducing the penalty imposed under Rule 173-Q read with Section 11AC of the Central Excise Act, 1944. The appeal was admitted based on the substantial question of law regarding the correctness of the Tribunal's decision in reducing the penalty. The CESTAT had set aside the penalty, but the High Court found that the Tribunal's view could not be upheld.

The High Court referred to the decision of the Apex Court in the case of Union of India v. Dharmendra Textile Processors, 2008, where it was held that the penalty under Rule 173-Q and Section 11AC is mandatory, and there is no discretion available to reduce the penalty. Therefore, the High Court concluded that the penalty imposed by the Joint Commissioner of Central Excise and Customs was to be restored and found payable by the respondent-assessee. The impugned judgment of the CESTAT was quashed and set aside, with the appeal being allowed in favor of the revenue and against the assessee.