2018 (10) TMI 6 - AT - Central Excise

Benefit of reduced penalty - irregular availment of CENVAT Credit - Duty demand has already been paid by the appellant, even before the issue of show cause notice - Held that - Section 11AC provides for mandatory penalty equal to the duty determined as payable, in terms of the proviso to Section 11A. But it also provides that if the said duty amount is paid within 30 days from the date of communication of the order of the Central Excise officer determining such duty, the amount of penalty liable to be paid shall be only 25% of the duty so determined. The appellant is entitled to the payment of reduced amount of penalty - appeal allowed.

Summary

Issues:
Dispute over availment of cenvat credit on inputs/input services; Challenge to penalty amount imposed by Tribunal; Interpretation of Section 11AC regarding penalty calculation.

Analysis:
The appeal was against the Order-in-Appeal passed by the Commissioner (Appeals), Customs & Central Excise, Delhi-II. The appellant, engaged in manufacturing packing materials, disputed the availment of cenvat credit on inputs/input services. The issue arose from a show cause notice dated 24.06.2011, leading to a decision by CESTAT on 19.10.2016. The duty demand was reduced to &8377; 99,642/- with an equal penalty under Section 11AC. The appellant paid the disputed amount even before the notice was issued. The lower authorities granted a refund but maintained the penalty amount. The appeal aimed to limit the penalty to 25% of the duty held payable by the Tribunal's order.

During arguments, the appellant's counsel cited Section 11AC, stating that if duty is paid within one month of the officer's order, the penalty is reduced to 25% of the duty. As the duty was paid before the notice, the appellant sought the reduced penalty. The Revenue's representative supported the original penalty, citing the Tribunal's order. After hearing both sides and reviewing the records, the Tribunal considered the final duty amount of &8377; 99,642/- and the penalty. Section 11AC mandates a penalty equal to the determined duty but allows for a 25% penalty if the duty is paid within 30 days. In this case, as the duty was paid before the notice, the Tribunal held that the appellant is entitled to the reduced penalty as per Section 11AC.

Therefore, the Tribunal allowed the appeal, granting the appellant the benefit of the reduced penalty and consequential relief. The decision was based on the interpretation of Section 11AC and the timing of duty payment in relation to the issuance of the show cause notice.