2006 (4) TMI 60 - HC - Central Excise

Delay in payment of duty on account of mistaken belief of the assessee that the goods could be cleared for the purpose of testing without payment of full duty There is no intent to evade the payment of duty Tribunal finding shows it was not a case of fraud so penalty u/s 11 is not justified

Summary

Issues:
1. Interpretation of penalty under Section 11AC of the Central Excise Act, 1954.
2. Discretion of the assessing officer in levying penalty.
3. Requirement of mens rea for the imposition of penalty.
4. Intent to evade payment of duty as a condition for penalty.

Analysis:

1. The Tribunal deleted the penalty under Section 11AC of the Central Excise Act, 1954, based on the appellant's mistaken belief regarding the clearance of goods for testing without full duty payment. The Tribunal emphasized that the duty was eventually paid in full, and there was no intent to evade payment. The Tribunal cited a precedent where no penalty can be imposed if duty is paid before the show cause notice issuance. The High Court found no substantial question of law in this regard, dismissing the appeal.

2. The appellant contended that the Tribunal erred in waiving the penalty, arguing that Section 11AC mandates the penalty without discretion for the assessing officer. However, the High Court upheld the Tribunal's decision, emphasizing the absence of fraud, collusion, or willful misstatement, which are prerequisites for penalty imposition under Section 11AC.

3. Section 11AC stipulates that penalty is levied in cases of fraud, collusion, willful misstatement, or contravention of provisions with intent to evade duty payment. The High Court highlighted that the foundation for penalty imposition requires a finding of mens rea or guilty mind. In this case, since there was no intent to evade payment and the duty was eventually paid, the imposition of penalty was deemed unnecessary.

4. The High Court clarified that the Tribunal's decision was based on the absence of fraudulent intent or contravention of provisions to evade duty payment. The Court emphasized that the appellant's delayed payment was due to a mistaken belief rather than an intention to evade duty. As a result, the Tribunal's judgment did not raise any legal question, leading to the dismissal of the appeal.

Overall, the High Court upheld the Tribunal's decision to delete the penalty under Section 11AC, emphasizing the lack of fraudulent intent or contravention of provisions to evade duty payment in the appellant's actions.