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2015 (5) TMI 245 - HC - Central ExcisePenalty u/s 11AC - Interest u/s 11AB - Discretion of Tribunal to impose penalty and interest - Held that - Insofar as the issue relating to the imposition of penalty under Section 11AC of the Central Excise Act is concerned, if tax is paid before issuance of show cause notice under the provisions of the Finance Act, 1994, the said issue now stands resolved by a Larger Bench decision of the Supreme Court in Union of India and others - Vs - Dharamendra Textile Processors & Ors. 2008 (9) TMI 52 - SUPREME COURT , wherein it was held that penalty under Section 11AC of the Central Excise Act is mandatory and there is no element of discretion. The provisions of Section 11AB of the Central Excise Act came into effect from 28.9.1996 by Finance (No.2) Act, 1996. No doubt that in the year 2001, there is a change in the rate of interest from 11.5.2001 from 10% - 36% to 18% - 36%, but that is irrelevant. Therefore, the plea of the appellant that the adjudicating authority was fully justified is imposing interest is sustainable. Further, there is no escapement for the assessee from payment of interest under Section 11AB of the Act, even though the assessee had paid the duty prior to issuance of show cause notice. Accordingly, the order of the Tribunal deleting the interest levied under Section 11AB of the Central Excise Act is also liable to be set aside. - no hesitation to hold that interest and penalty are imposable and there is no discretionary power vested with the authorities for waiving the same. - both the Commissioner (Appeals) and the Tribunal have no discretion to waive the interest and penalty and, therefore, the orders are liable to be interfered with - Decided in favour of Revenue.
Issues involved:
1) Challenge to order of Appellate Tribunal by Revenue 2) Imposition of interest and penalty under Central Excise Act 3) Interpretation of Sections 11AB and 11AC of the Act Issue 1: Challenge to order of Appellate Tribunal by Revenue The Revenue challenged the order of the Appellate Tribunal, which dismissed their appeal. The High Court framed substantial questions of law for consideration. The main contention was whether interest on duty can be levied under Section 11AB and penalty imposed under Section 11AC if duty was paid before the issuance of a show cause notice, despite legal provisions under the Central Excise Act, 1944. The Court analyzed the case to determine if the Tribunal erred in relying on case law not applicable to the present situation. Issue 2: Imposition of interest and penalty under Central Excise Act The case involved a manufacturer and service provider of computer peripherals and parts who received a show cause notice for service tax, interest under Section 11AB, and penalties under Section 11AC and Rule 25 of the Central Excise Rules, 2002. The Commissioner (Appeals) upheld the duty demand but set aside the interest and penalty based on Supreme Court judgments. The Tribunal confirmed the Commissioner's decision, leading the Revenue to appeal. The High Court examined the legal position on the mandatory imposition of penalties under Section 11AC, citing relevant Supreme Court judgments. Issue 3: Interpretation of Sections 11AB and 11AC of the Act Regarding the imposition of penalties under Section 11AC, the High Court referenced Supreme Court decisions emphasizing the mandatory nature of penalties under this provision. The Court highlighted that once Section 11AC applies, authorities have no discretion in quantifying penalties. Additionally, the Court addressed the challenge to interest levied under Section 11AB, clarifying that the provision was applicable from 1996 and remains relevant despite changes in interest rates in 2001. The Court concluded that interest and penalties are imposable without discretionary power to waive them, overturning the Tribunal's decision and ruling in favor of the Revenue. In conclusion, the High Court set aside the Tribunal's order and allowed the Revenue's appeal, emphasizing the mandatory imposition of interest and penalties under the Central Excise Act.
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