2017 (2) TMI 1041 - SC - Central Excise

Quantum of penalty - the respondent manufactured copper coils from the copper strips and used them capatively in the up-gradation of smoothing reactors. The respondent, however, neither paid any duty on the copper coil used by them capatively in their modification activity undertaken at the relevant period nor did they submit the requisite declaration u/r 173-C of the CER, 1944 - Held that - the Tribunal erred in reducing the amount of penalty from ₹ 2,06,000/- to ₹ 50,000/-. Indeed, the Tribunal, failed to take into consideration the law laid down in the case of Dharamendra Textile Processors 2008 (9) TMI 52 - SUPREME COURT which the Tribunal was bound to take while deciding the appeal and instead the Tribunal wrongly placed reliance on its own decision in the case of Escorts JCB Ltd. vs CCE 1999 (8) TMI 141 - CEGAT, NEW DELHI - the Tribunal also gave no justifiable legal reasons for reducing the penalty amount. Appeal allowed - decided in favor of appellant-Revenue.

Summary

Issues:
Appeal against reduction of penalty amount by Customs, Excise and Service Tax Appellate Tribunal.

Analysis:
The case involved an appeal against the reduction of penalty amount by the Customs, Excise and Service Tax Appellate Tribunal. The respondent, a Limited Company engaged in the manufacture of parts of Railways and Tramways, including smoothing Reactors, was found to have not paid duty on copper coils used in the modification of old smoothing reactors. The adjudicating authority demanded unpaid duty and imposed a penalty of ?2,06,000 under Section 11-AC of the Central Excise Act, 1944. The respondent appealed against the penalty, arguing that a nominal amount should be levied instead. The Tribunal partly allowed the appeal, reducing the penalty to ?50,000. The Revenue appealed this decision to the Supreme Court.

The appellant contended that the Tribunal had no jurisdiction to reduce the penalty amount imposed by the adjudicating authority, citing the law laid down by the Supreme Court in Union of India vs. Dharamendra Textile Processors case. The appellant argued that once a case for penalty is established, there is no discretion left with the Tribunal to reduce the penalty amount. The Supreme Court, after hearing the arguments, accepted the submission of the appellant.

The Supreme Court referred to the Dharamendra Textile Processors case, where it was held that there is no discretion in imposing penalties under Section 11-AC of the Act. The Court found that the Tribunal erred in reducing the penalty amount without justifiable legal reasons and without considering the legal position established in the Dharamendra Textile Processors case. The Court held that the Tribunal's decision was not legally sustainable and set aside the impugned order, restoring the order passed by the adjudicating authority. The appeal was allowed, and no costs were awarded.