2007 (7) TMI 699 - AT - Central Excise

Summary

Issues involved: Challenge to reduction of penalty u/s Rule 25 of Central Excise Rules, 2001 read with Section 11AC of Central Excise Act, 1944.

Summary:
The Revenue challenged the reduction of penalty imposed on the respondent by the Commissioner (Appeals) from Rs. 1,37,560 to Rs. 25,000. The Revenue contended that the penalty was rightly imposed due to the respondent's suppression of material facts regarding the manufacture and clearance of branded goods. The Appellate Commissioner reduced the penalty citing Section 11AC, which provides for a maximum penalty equal to the duty determined, and relied on a Supreme Court decision. However, a Tribunal decision clarified that once mens rea is established, the penalty must be equal to the duty determined, with only specific provisions allowing for reduced penalties. The Tribunal emphasized that any discretion to impose a lesser penalty would defeat the purpose of deterrence intended by Section 11AC.

The reliance on the Supreme Court decision in a different context was deemed misconceived, as it did not apply to the interpretation of penalty provisions under Section 11AC of the Central Excise Act. The Supreme Court's decision regarding a different statute's penalty provisions did not impact the Tribunal's interpretation of Section 11AC. Therefore, the reduction in penalty ordered by the Commissioner (Appeals) was deemed unwarranted, and the original penalty amount imposed by the adjudicating authority was restored. The appeal by the Revenue was allowed accordingly.