2007 (3) TMI 194 - HC - Central Excise

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 - on the plain language of Section 11AC of the Act it is required to be established that there was intention to evade payment of duty no finding on record that there was any intention to evade payment of duty revenue s appeal dismissed

Summary

Issues:
Imposition of penalty under Section 11AC of Central Excise Act,1944 when disputed duty amount is deposited before the issue of show cause notice.

Analysis:
The appeal was filed against an order by the Custom Excise and Service Tax Appellate Tribunal, New Delhi, which held that imposing a penalty on the manufacturer was not justified. The case involved a shortage of chemicals and polyester film leading to an alleged evasion of central excise duty. The Adjudicating Officer levied a penalty under Rule 25 of the Central Excise Rules, 2002, along with Section 11AC of the Act. The duty amount was already deposited by the assessee before the issuance of a show cause notice. The Commissioner upheld the penalty, but the Tribunal set it aside, stating that no penalty was imposable as the duty amount was paid before the notice was issued.

The High Court, after hearing arguments, found no legal infirmity in the impugned order. It was noted that Section 11AC of the Act requires the establishment of an intention to evade duty, which was not recorded in the orders passed by the Adjudicating Officer and the Commissioner. The Court emphasized that the duty was paid before the show cause notice, which the Tribunal considered as evidence of no intention to evade duty. As a result, the Court dismissed the appeal, stating it lacked merit and did not need to be admitted based on the substantive question of law raised by the revenue.

In conclusion, the High Court dismissed the appeal as it found no legal basis to support the imposition of a penalty under Section 11AC of the Central Excise Act, 1944, when the disputed duty amount had been deposited before the issuance of a show cause notice. The Court highlighted the lack of intention to evade duty and upheld the Tribunal's decision to set aside the penalty on the manufacturer and the Director of the Company.