2007 (9) TMI 147 - HC - Customs

Assessee was not given opportunity to cross-examine the makers who have submitted the documents. Genuineness of documents was testified by the person who was not a party to preparation of documents Opportunity of cross-examination should be given to assessee before revenue rely on these documents

Summary

Issues:
1. Whether the Tribunal erred in waiving and reducing the penalty under Section 11AC of the Central Excise Act, 1954.
2. Whether the Tribunal's decision to set aside the penalty imposed was legally justified.

Analysis:
Issue 1:
The Tribunal had deleted the penalty levied under Section 11AC of the Central Excise Act, 1954, based on the fact that the appellants had paid the duty liability, albeit with some delay, due to a mistaken belief. The Tribunal found no intent to evade payment of duty and cited a precedent where no penalty can be imposed if duty has been paid before the show cause notice. The appellant contended that the penalty under Section 11AC is mandatory and does not allow discretion. The Revenue questioned the Tribunal's decision to set aside the penalty, arguing it was equal to the amount of duty not paid during the delay period. However, the High Court found no substantial question of law in this regard, indicating that the Tribunal's decision was upheld.

Issue 2:
Section 11AC of the Act specifies that a penalty can be levied if duty has not been paid due to fraud, collusion, willful misstatement, or contravention of provisions with intent to evade payment. The High Court emphasized that a finding of mens rea or guilty mind is necessary before imposing a penalty under Section 11AC. In this case, the Tribunal's findings indicated no fraudulent intent or willful misstatement by the assessee, as the full duty was paid upon clearance of the goods. The delay in payment was attributed to a mistaken belief rather than an intent to evade duty. As a result, the High Court concluded that the penalty was not imposable, as there was no evidence of fraudulent behavior or intent to evade payment. Therefore, the Tribunal's judgment was deemed legally sound, and the appeal was dismissed.

In summary, the High Court upheld the Tribunal's decision to delete the penalty under Section 11AC, as there was no evidence of fraudulent intent or willful misstatement by the assessee, and the duty had been paid in full, albeit with a delay due to a mistaken belief. The Court emphasized the necessity of establishing mens rea before imposing a penalty under Section 11AC, and since no intent to evade payment of duty was found, the penalty was not deemed mandatory in this case.