2015 (10) TMI 2448 - AT - Central Excise

Penalty u/s 11AC - Undervaluation of goods - Held that - As the penalty was imposed under Section 11AC of the Act, we do not find that there is any requirement of impose penalty under Rule 173Q of the erstwhile Central Excise Rules. So, the contention of the learned Authorised Representative on this issue cannot be accepted. The assessee should be allowed to pay penalty 25% of the duty alongwith entire amount of duty and interest, within 30days from the communication of this order under Section 11AC. - appeals filed by the Revenue are allowed to the extent the penalty imposed under Section 11AC is enhanced to equal amount of duty. The assessees are entitled to pay the penalty 25% of the duty alongwith entire amount of duty and interest within 30 days from the date of communication of this order - Decided partly in favour of assessee.

Summary

Issues:
Appeal against demand of duty and penalty, imposition of penalty under Section 11AC of the Central Excise Act, 1944, discretion of adjudicating authority in reducing penalty amount, imposition of penalty under Rule 173Q of the Central Excise Rules, 1944.

Analysis:
The appeals in question arose from a common order regarding the undervaluation of goods by two Ceramic Tiles manufacturers, leading to demands of duty, interest, and penalties. The Tribunal previously upheld the undervaluation allegation and remanded the matter for quantification of demand, interest, and penalties. The adjudicating authority confirmed the duty demand, interest, and imposed penalties on both manufacturers. One of the manufacturers contested only the imposition of penalties. The Revenue filed appeals against both manufacturers for imposing penalties equal to the duty amount under Section 11AC of the Central Excise Act, 1944.

The advocate for one manufacturer stated that they were not contesting the duty demand and interest but were challenging the penalty imposition. On the other hand, the Revenue argued that the adjudicating authority lacked discretion to reduce the penalty amount under Section 11AC and should have imposed separate penalties under Rule 173Q of the Central Excise Rules, 1944.

Since one manufacturer did not contest the duty demand and interest, the focus shifted to the appeals filed by the Revenue to impose penalties equal to the duty amount under Section 11AC. The Tribunal concurred with the Revenue's argument, citing Supreme Court precedent that mandates the imposition of penalties equal to the duty amount under Section 11AC without discretion for reduction. Therefore, the penalties were enhanced to equal the duty amount under Section 11AC, and the requirement to impose penalties under Rule 173Q was deemed unnecessary.

Consequently, the assessees were directed to pay penalties equal to 25% of the duty along with the entire duty and interest within 30 days from the order's communication. The appeals filed by the Revenue were allowed to the extent of enhancing the penalties under Section 11AC, while the appeal filed by the assessee was dismissed as withdrawn at their advocate's request.