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2009 (4) TMI 64 - HC - Central ExciseDemand for equal penalty u/s 11 AC and demand of interest u/s 11AB - Tribunal was right in holding that since provisions of Section 11AC and 11AB came into the statute book w.e.f 28.9.1996 only, the authorities could not have relied upon these provisions to impose penalty and interest in respect of the proceedings relating to the period prior to 28.9.1996 - Even if Sections 11AB and 11AC were not applicable, authorities making reference to Rule 173Q of the Central Excise which provides for imposition of penalty three times the value of goods, is justified held that if a person time and again was guilty of evading duty in an illegal manner there is a valid reason to impose heavier penalty upon him
Issues:
1. Interpretation of Section 11AC of the Central Excise Act, 1944 2. Application of Rule 173Q of the Central Excise Rules, 1944 3. Interpretation of Section 11AB of the Central Excise Act, 1944 4. Benefit of wastage in suppressed production 5. Imposition of penalty on an individual involved in duty evasion Issue 1: Interpretation of Section 11AC of the Central Excise Act, 1944 The High Court examined whether the Tribunal was correct in vacating the demand for penalty equal to duty under Section 11AC of the Act. The Tribunal held that Section 11AC came into effect from 28.2.1996, while the duty in question was determined under a different section of the Act. The Court disagreed with the Tribunal, stating that Rule 173Q also allows for penalty imposition, and the penalty was justified even without Section 11AC. Issue 2: Application of Rule 173Q of the Central Excise Rules, 1944 The Court found that Rule 173Q of the Rules permits the imposition of a penalty up to three times the value of goods. In this case, the penalty imposed was only equivalent to the duty assessed. The Court held that even without Sections 11AB and 11AC, the authorities were justified in imposing the penalty under Rule 173Q. The Tribunal's decision to vacate the penalty was deemed incorrect by the Court. Issue 3: Interpretation of Section 11AB of the Central Excise Act, 1944 Regarding Section 11AB, the Court analyzed whether the Tribunal was correct in vacating the demand for interest on delayed payment of duty. The Tribunal held that interest could not be imposed as Section 11AB came into effect after the relevant period. The Court agreed with the Tribunal's interpretation of Section 11AB and ruled in favor of the manufacturer against the department. Issue 4: Benefit of wastage in suppressed production The Court considered whether the Tribunal was right in allowing the benefit of wastage of 27% to the party in suppressed production cases. The Court noted that the evidence of suppressed production was concrete, based on dispatch reports and other documents. The Court did not find any fault with the Tribunal's decision in this regard. Issue 5: Imposition of penalty on an individual involved in duty evasion The Court examined whether the Tribunal was correct in vacating the penalty imposed on an individual involved in duty evasion. The Tribunal had set aside the penalty on the Managing Director, but the Court disagreed, stating that the individual's involvement in duty evasion warranted the penalty. The Court restored the penalty imposed on the Managing Director. In conclusion, the High Court ruled on various issues related to excise duty evasion, penalties, and interpretations of relevant legal provisions, ultimately providing a detailed analysis and decision on each issue raised in the case.
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