2016 (11) TMI 1289 - HC - Central Excise

Whether the penalty under Section 11-AC is liable to be imposed on assessee and interest under Section 11-AB can be levied in view of Explanation-1 of the said Sub-Section (2B) of Section 11-A where duty has been deposited before issue of show cause notice? - Held that - We find that there is a consensus in various High Courts as also various Benches of High Courts that if disputed duty is paid by an assessee before a show-cause-notice proposing penalty under Section 11-AC and interest under Section 11-AB is issued this would show that there was no question of any fraud misrepresentation or suppression of fact hence penalty and interest should not be levied. In Rashtriya Ispat Nigam Ltd. Vs. Commissioner of Central Excise Visakhapatnam 2002 (11) TMI 234 - CEGAT BANGALORE took this view. Confronted with the aforesaid authorities learned Counsel for appellant could not dispute the above position and also neither could place any other authority taking a different view so as to persuade us to take a different view nor could advance any other argument justifying penalty and interest under aforesaid provision even when the assessee admitting disputed liability has deposited the same even before issuing of a show-cause-notice under the aforesaid provision - substantial question of law is answered against Revenue and in favor of assessee - appeal disposed off.

Summary

Issues:
Whether penalty under Section 11-AC can be imposed on the assessee and interest under Section 11-AB can be levied when duty has been deposited before the issue of a show cause notice.

Analysis:
The case involved a dispute where the assessee admitted liability of payment of duty and deposited the required amount before the show cause notice was issued. The Custom Excise and Service Tax Appellate Tribunal set aside the proposed penalty under Section 11-AC and interest under Section 11-AB, stating that the petitioner did not intend to defy the duty demanded. The High Court noted that various High Courts and Benches have held that if disputed duty is paid before the issuance of a show cause notice proposing penalty and interest, it indicates no fraud, misrepresentation, or suppression of facts, thus penalty and interest should not be imposed. The court cited judgments from different High Courts supporting this view, including the Supreme Court's dismissal of an appeal on a similar matter. The learned counsel for the appellant failed to present any contrary authority or argument to challenge this position.

The court, considering the precedents and lack of opposing arguments, ruled against the Revenue and in favor of the assessee. It upheld the Tribunal's decision that no penalty or interest under Section 11-AC and 11-AB respectively was payable by the assessee when the disputed duty was voluntarily deposited before the issuance of the notice under these sections. Consequently, the appeal was deemed lacking in merit and dismissed.