2015 (2) TMI 743 - HC - Central Excise

Penalty under Section 11AC - Removal of credit availed Inputs as such - Demand of duty under Section 11A(1), interest under Section 11AB - Held that - As is evident from the facts of the case, here is a case of adjudication invoking the extended period proviso to Section 11A(1) of the Central Excise Act. In such circumstances, the decision of the Larger Bench of the Supreme Court in case of Dharamendra Textile Processors 2008 (9) TMI 52 - SUPREME COURT makes it very clear that penalty under Section 11AC is imposable. The above-said decision was followed by the Supreme Court in the case of Rajasthan Spinning and Weaving Mills 2009 (5) TMI 15 - SUPREME COURT OF INDIA , in which supreme court held that the decision in Dharamendra Textile must, therefore be understood to mean that though the application of Section 11AC would depend upon the existence or otherwise of the conditions expressly stated in the section, once the section is applicable in a case the concerned authority would have no discretion in quantifying the amount and penalty must be imposed equal to the duty determined under sub-section (2) of Section 11A. That is what Dharamendra Textile decides. In view of the categorical statement of law and taking note of the specific provision of Section 11AC of the Central Excise Act, we are of the view that the Tribunal is not justified in confirming the order of the Commissioner (Appeals), who reduced the penalty imposed under Section 11AC of the Central Excise Act. Such a mandate under the Statute cannot be given a go-by by the Tribunal. We therefore, answer the questions of law in favour of the Revenue.Decided in favour of appellant/revenue.

Summary

Issues:
1. Tribunal's discretion in reducing penalty imposed on the assessee.
2. Special consideration for a Government of India enterprise.
3. Failure of the assessee to discharge statutory obligations.

Analysis:
1. The appeal was filed against the order of the Customs, Excise and Service Tax Appellate Tribunal, raising substantial questions of law regarding the Tribunal's discretion in reducing the penalty imposed on the second respondent/assessee. The case involved the removal of modvat availed inputs without payment of duty, leading to a show cause notice proposing duty demand, interest, and penalty under the Central Excise Act, 1944. The Adjudicating Authority demanded duty, interest, and a penalty of Rs. 8,16,316 on the assessee.

2. The Commissioner (Appeals) upheld the duty demand but reduced the penalty to Rs. 1.00 lakh. The Revenue appealed against the penalty reduction, while the assessee did not challenge the duty demand. The Tribunal dismissed the appeal, noting the Commissioner's sound discretion in reducing the penalty due to the assessee being a Public Sector Undertaking. The Tribunal emphasized that a lesser penalty could be imposed based on the circumstances of the case.

3. The Revenue challenged the Tribunal's order, arguing that the penalty reduction was not justified under Section 11AC of the Central Excise Act. Citing Supreme Court decisions, the High Court clarified that once Section 11AC applies, there is no discretion in quantifying the penalty, which must be equal to the duty determined. Referring to a previous order favoring the Revenue on the penalty issue, the High Court held that the Tribunal erred in confirming the reduced penalty and set aside the Tribunal's order in favor of the Revenue.

4. The High Court emphasized that the specific provision of Section 11AC mandated no discretion in penalty imposition, leading to a decision in favor of the Revenue. The Court set aside the Tribunal's order, allowing the Civil Miscellaneous Appeal in favor of the Revenue. The questions of law were answered in favor of the Revenue, and the appeal was allowed without costs.