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2015 (5) TMI 372 - HC - Central ExcisePenalty u/s 11AC - whether the assessee is liable to pay interest and penalty in respect of the duty paid prior to the issue of a show cause notice to payment made after the due date - Held that - though the application of Section 11AC of the Act 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 of penalty. It must be imposed equal to the duty determined under Sub-Section (2) of Section 11 of the Act. Therefore, imposition of penalty is not automatic. Only if the conditions prescribed in Section 11AC of the Act is fulfilled, then there is no discretion left with the authority except imposing penalty. - portion of the order setting-aside the imposition of penalty is hereby set-aside. The matter is remitted back to the original authority to consider the leviability of penalty in the light of the statutory provisions contained under Section 11AC of the Act and the interpretation by the Apex Court in the 2009 (5) TMI 15 - SUPREME COURT OF INDIA and 2008 (9) TMI 52 - SUPREME COURT in accordance with law. - Matter remanded back - Decided in favour of Revenue.
Issues involved:
Interpretation of liability for interest and penalty in relation to duty payment before and after the issue of a show cause notice; applicability of Section 11AC of the Act on penalty imposition; determination of interest rate; imposition of penalty on company directors. Analysis: 1. The main issue in this case revolves around the liability of the assessee to pay interest and penalty in connection with duty payment made before and after the issuance of a show cause notice. The Appellate Authority and the Tribunal, based on previous judgments, concluded that if duty is paid before the notice, no interest or penalty is due. However, the Apex Court in the case of Union of India v. Dharamendra Textile Processors established that once the conditions in Section 11AC are met, penalty imposition is mandatory without any discretion. This led to a reevaluation of previous decisions. 2. Subsequently, the Apex Court in Union of India V/s. Rajasthan Spinning and Weaving Mills clarified that the application of Section 11AC depends on the conditions expressly stated in the Section. If applicable, the authority must impose a penalty equal to the determined duty under Sub-Section (2) of Section 11. Therefore, the imposition of penalty is not automatic but dependent on fulfilling the conditions specified in Section 11AC. 3. Following these judgments, the High Court found that the earlier decision absolving penalty when duty is paid before the show cause notice is not sustainable. The matter was remitted to the original authority to reassess the penalty imposition in line with Section 11AC and the interpretations provided by the Apex Court. 4. Regarding the payment of interest, Sections 11AA and 11AB of the Act make interest payment automatic. However, the rate of interest to be charged is subject to the notification issued periodically. The case was sent back to the original authority to determine the applicable interest rate for delayed payments irrespective of the reason for the delay in duty payment. 5. In a specific case (CSTA No. 7/2005), penalty was imposed on both the company and its directors. While the penalty on directors was set aside by the lower Appellate Authority and the Tribunal, the Revenue did not challenge this decision. The High Court directed the original authority to focus on the penalty imposition for the company only and not against the directors in the further proceedings. In conclusion, the High Court allowed all appeals, remitting the matters back to the original authority for appropriate orders based on the observations made in the case and the judgments of the Apex Court cited in the order.
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