2008 (1) TMI 303 - AT - Central Excise

Contention of revenue is that Commissioner (Appeals) could not have reduced the mandatory penalty imposed under Sec.11AC since duty amount has been deposited with interest before issue of SCN, so equal amount of penalty is not imposable under Rule 25 read with Sec.11AC - impugned order reducing the penalty under the provisions of Rule 25 read with Sec.11AC is correct and does not require any interference revenue s appeal rejected

Summary

Issues involved:
Challenge to reduction of penalty amount from Rs.1,38,938/- to Rs.35,000/- under Sec.11AC by the revenue. Interpretation of Sec.11AC and Rule 25 in relation to penalty imposition when duty and interest were paid before the show cause notice issuance.

Analysis:
The appeal was filed by the revenue challenging the reduction of penalty from Rs.1,38,938/- to Rs.35,000/- as ordered by the Commissioner (Appeals). The revenue contended that the mandatory penalty under Sec.11AC should not have been reduced, citing a precedent where it was held that the mandatory penalty cannot be reduced. On the other hand, the respondent's counsel argued that the reduction of penalty was justified as the duty liability and interest were paid before the show cause notice was issued, in accordance with Sec.11AC(2B) of the Central Excise Act, 1944.

Upon reviewing the impugned order, it was observed that the Commissioner (Appeals) took into account the fact that the duty and interest were paid by the respondent before the show cause notice was issued. The appellants did not challenge the demand for penalty and interest, but only contested the imposition of an equal amount of penalty under Rule 25 read with Sec.11AC before the Commissioner (Appeals). The Commissioner (Appeals) was found to have correctly applied the law as established by the Hon'ble High Court of Bombay in a relevant case. The High Court's judgment emphasized that in cases where duty was paid before the issuance of the show cause notice, the discretion in favor of the assessee could be exercised under Rule 25, and Section 11AC was not invoked.

As the respondents did not dispute the penalty amount imposed by the Commissioner (Appeals), the reduction of penalty under Rule 25 read with Sec.11AC was deemed appropriate and in accordance with the legal provisions. The Tribunal concluded that the issue was squarely covered by the judgment of the Hon'ble High Court, and therefore, the appeal filed by the revenue was devoid of merit and was rejected.