2009 (6) TMI 89 - HC - Central Excise

Whether the Hon ble CESTAT was justified in setting aside the penalty imposed under Section 11AC which is required to be equal to the duty confirmed by the Tribunal? - Whether in case of clandestine removal of goods the payment of part of duty subsequently made on notice by the department prior to issue of show cause can discharge the Respondent from the rigour of provisions of Section 11AC? - Held that, the question, of having paid the amount before issuance of the show cause notice or after issuing the show cause notice cannot result in holding that there is no requirement of determination - mere payment of duty before issuance of show cause notice is also of no consequence. Revenue s appeal allowed

Summary

The High Court of Bombay addressed a case where a penalty was imposed under Section 11AC of the Central Excise Act, 1944. The case involved a show cause notice issued to the respondents, who paid a portion of the duty before the notice. The Additional Commissioner of Central Excise demanded the remaining duty and imposed a penalty. The respondents' appeal to the Commissioner (Appeals) was dismissed, leading to an appeal to the CESTAT. The CESTAT set aside the penalty and interest but upheld the duty. The High Court, considering the Supreme Court judgments in Union of India v. Dharamendra Textile Processors and Union of India v. M/s. Rajasthan Spinning & Weaving Mills, found that the penalty imposed must be equal to the duty confirmed. The Court emphasized that the intent to evade payment and the duty determination under Section 11A are prerequisites for imposing a penalty under Section 11AC. The Court rejected the argument that paying the duty before the show cause notice eliminates the need for determining the liability. The Court also referenced the Division Bench judgment in C.C.E. & C. Aurangabad v. Sterlite Optical Technologies Ltd. to support its decision. Ultimately, the Court allowed the appeal filed by the Revenue, answering both questions against the assessee and in favor of the Revenue, thereby upholding the penalty and duty demanded. The Court appreciated the assistance provided by the learned Amicus curiae.