2017 (7) TMI 1256 - HC - Central Excise

Quantum of penalty - Section 11AC(1)(d) of the Central Excise Act, 1944 read with Explanation 1(ii) thereof - Held that - Explanation 1(ii) to Section 11AC(1)(d) of the CE Act makes it clear that the petitioners cannot be denied the benefit of the maximum penalty of 15% of the duty demanded. In other words the penalties awarded to the petitioners by the Commission required to be re-worked in terms of the above provision by ensuring that it does not cross 15% in the aggregate of the total duty demanded - While setting aside the penalties awarded by the Commission by the impugned order, the Court directs that application of the petitioners will once again be listed before the Commission on 10th August, 2017 for the above purpose - petition disposed off.

Summary

Issues: Penalty imposed by Customs, Central Excise & Service Tax Settlement Commission exceeding 15% of the duty determined.

The judgment in W.P. (C) No. 7763/2016 dealt with the issue of the penalty imposed on the petitioners by the Customs, Central Excise & Service Tax Settlement Commission. The Commission had imposed penalties of varying amounts on the petitioners in response to a show cause notice dated 20th August, 2015. The petitioners contended that the penalties exceeded the permissible limit of 15% of the duty determined under Section 11AC(1)(d) of the Central Excise Act, 1944. The respondent argued that the amendment to Section 11AC(1)(d) was introduced after the issuance of the show cause notice, and since the prosecution against the petitioners was dropped, the penalties were justified.

The Court considered the arguments presented by both parties and examined the provisions of Section 11AC(1)(d) of the Central Excise Act. It noted that the petitioners were entitled to the benefit of the maximum penalty of 15% of the duty demanded, as clarified by Explanation 1(ii) of the provision. The Court found that the penalties imposed on the petitioners needed to be re-evaluated to ensure they did not exceed the 15% limit in aggregate of the total duty demanded. Consequently, the Court set aside the penalties awarded by the Commission and directed that the application of the petitioners be listed before the Commission for reassessment on 10th August, 2017.

In conclusion, the writ petition was disposed of with the Court's decision to rework the penalties imposed by the Commission in accordance with the provisions of Section 11AC(1)(d) of the Central Excise Act, ensuring that the penalties did not surpass the prescribed limit of 15% of the duty demanded.