2017 (12) TMI 1367 - AT - Central Excise

Levy of penalty - duty demand with interest paid before issuance of SCN - Held that - duty is paid before the issuance of SCN, so, penalty under Section 11AC of the Central Excise Act 1944 and Rule 25 of Central Excise Rules cannot be imposed - reliance placed in the case of CCE, Rohtak vs. S.B. Packaging Ltd. 2007 (3) TMI 194 - HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH , where it was held that Penalty equivalent to disputed duty amount under Section 11 AC of Central Excise Act,1944 is not leviable where disputed duty amount is deposited prior to issue of SCN - penalty set aside - duty sustained - appeal allowed in part.

Summary

Issues: Duty demand, Penalty levy

Duty Demand:
The appeal was filed against Order-in-Appeal No. 273/2014 dated 19.11.2015 by the appellant, a Government Undertaking previously known as Sanjay Gandhi Thermal Power Station, later renamed as Madhya Pradesh Power Generating Company Ltd. The dispute period ranged from 01.03.2014 to 31.12.2012. The appellant was selling flying ash during this period, leading to a duty demand and penalty imposition by the department. The appellant contested the penalty but accepted the duty demand. The appellant's counsel argued that the duty was paid before the show cause notice, and therefore, penalty should not be levied. It was emphasized that there was no malafide intention due to confusion regarding duty payment as a Government undertaking.

Penalty Levy:
The department's representative justified the impugned order. However, after hearing both sides and reviewing the records, it was observed that the duty had been paid before the show cause notice was issued. Referring to legal precedents such as Commissioner v. Rashtriya Ispat Nigam Ltd., CCE vs. Gaurav Mercantiles Ltd., CCE Aurangabad vs. Matsyodari Steel & Alloys Pvt. Ltd., and CCE Rohtak vs. S.B. Packaging Ltd., it was determined that penalty under Section 11AC of the Central Excise Act 1944 and Rule 25 of Central Excise Rules could not be imposed in such circumstances. Following the ratio established in the mentioned cases, the impugned order was modified, and the penalty levy was canceled. The duty was upheld, and the appeal by the assessee was partially allowed.

This judgment highlights the importance of timely duty payment and the implications on penalty imposition, especially in cases where duty is paid before the issuance of a show cause notice. The decision was made based on legal precedents and the absence of malafide intent on the part of the appellant, a Government Undertaking facing confusion regarding duty payment obligations.