2017 (4) TMI 146 - AT - Central Excise

Penalty - invocation of Section 11A - Clandestine removal - shortage of stock - Held that - the respondent had paid the duty evaded even prior to issue of SCN. However, the benefit of Section 11A (2) will be available only if 25% of the penalty is also paid by the assessee within 30 days from the date of receipt of the order. From the records, it is seen that 25% of penalty has not been paid by the respondent even though the duty amount has been paid within 30 days from the date of communication of Order-in-Original. Hence, benefit of reduced penalty will not be available to the respondent and consequently, the penalty leviable u/s 11AC of the Act will be the amount equal to the duty evaded - appeal allowed - decided in favor of Revenue.

Summary

Issues:
- Reduction of penalty under Section 11AC by Commissioner (Appeals)
- Applicability of penalty equal to duty evaded
- Benefit of reduced penalty under Section 11A(2)
- Failure to pay 25% penalty within 30 days
- Legal precedent supporting penalty equal to duty evaded

Reduction of Penalty under Section 11AC by Commissioner (Appeals):
The case involved a respondent engaged in manufacturing aluminum ingots who admitted to evasion of Central Excise duty. The duty liability was voluntarily paid by the respondent, and penalties were imposed. The Commissioner (Appeals) upheld the duty demand but reduced the penalty payable by the respondent to 25% of the confirmed duty amount. The Revenue contended that the penalty under Section 11AC should be equal to the duty evaded, citing various case laws in support.

Applicability of Penalty Equal to Duty Evaded:
The Tribunal noted that the respondent admitted to the evasion of duty and voluntarily paid the amount. The law stipulates that in cases of fraud or willful misdeclaration, the penalty under Section 11AC should be equal to the duty evaded. The Tribunal referenced a judgment by the Hon'ble Bombay High Court to support this view, emphasizing the mandatory requirement of paying 25% of the penalty within 30 days of the order.

Benefit of Reduced Penalty under Section 11A(2):
The respondent had paid the duty evaded before receiving the show cause notice. However, the benefit of reduced penalty under Section 11A(2) would only apply if 25% of the penalty was paid within 30 days of the order. As the respondent failed to pay this reduced penalty within the stipulated time, the Tribunal concluded that the penalty leviable under Section 11AC should be equal to the duty evaded.

Failure to Pay 25% Penalty within 30 Days:
Despite paying the evaded duty promptly, the respondent did not fulfill the requirement of paying 25% of the penalty within the specified timeframe. This failure to comply with the statutory provision led to the denial of the benefit of reduced penalty and resulted in the imposition of the penalty equal to the duty evaded.

Legal Precedent Supporting Penalty Equal to Duty Evaded:
The Tribunal, in line with legal precedents and the provisions of the law, held that the penalty under Section 11AC should be commensurate with the duty evaded. Citing the judgment of the Hon'ble Bombay High Court, the Tribunal emphasized the importance of adhering to statutory requirements regarding penalty payments. Consequently, the appeal filed by the Revenue was allowed, affirming the imposition of the penalty equal to the duty evaded.

This detailed analysis of the judgment highlights the key issues addressed by the Tribunal concerning the reduction of penalties, the applicability of penalty amounts, compliance with statutory provisions, and the legal precedents guiding such decisions.