2007 (8) TMI 205 - HC - Central Excise

Penalty cannot be reduced when misdeclaration is proved even if evaded duty is paid before issue of SCN Claiming of depreciation u/s 32 I.T. Act even after fling declaration u/r 57T Central Excise Rules cannot be treated as accounting error so penalty u/s 11AC C.E. Act is imposable

Summary

Issues involved:
1. Discretion of authorities under the Central Excise Act to levy less penalty or exempt penalty under section 11-AC on the duty evaded.
2. Whether payment of duty before issuance of show cause notice can exempt the levy of penalty under section 11-AC.

Analysis:

1. The High Court addressed the issue of whether authorities under the Central Excise Act have the discretion to levy less penalty or exempt penalty under section 11-AC on the duty evaded. The Court clarified that the penalty under section 11-AC cannot be waived or reduced simply because the duty evaded is paid before the issuance of a show cause notice. The Court emphasized that there are only two options available: either a penalty equivalent to the evaded duty or 25% of the duty evaded if the duty along with interest is paid within thirty days. The Court concluded that authorities do not have the discretion to levy less penalty or exempt penalty under section 11-AC once the requirements of the section are met.

2. The Court also examined whether the payment of duty before the issuance of a show cause notice can be a ground to exempt the levy of penalty under section 11-AC. The Court highlighted a specific circumstance in the case where the assessee was alleged to have suppressed facts and made a willful misstatement by claiming depreciation under section 32 of the Income Tax Act despite filing a Declaration stating otherwise. The Court held that such actions amounted to a misstatement aimed at evading duty, making the assessee liable for penalty equivalent to the evaded duty unless the interest under section 11-AB had been paid within thirty days. The Court emphasized that the Declaration filed by the assessee could not be justified as a human or accounting error, as it was a deliberate misstatement leading to evasion.

In conclusion, the High Court allowed the appeal, holding the respondent- assessee liable for a penalty equivalent to the evaded duty unless the interest under section 11-AB had been paid within the stipulated time frame. The Court's judgment clarified the authorities' lack of discretion to levy less penalty or exempt penalty under section 11-AC, emphasizing the importance of adhering to the statutory requirements and preventing duty evasion through misstatements or suppressions of facts.