2008 (1) TMI 158 - HC - Central Excise

Whether penalty and interest can be waived in toto on the sole ground that duty has been deposited before SCN - no such finding of fact that the assessee has committed fraud or misrepresentation with the intention to evade duty - held that no penalty is imposable under Section 11(A)(C), if duty is debited before issuance of show cause notice - no substantial question of law warranting admission of this appeal arises

Summary

Issues:
1. Whether penalty and interest can be waived when duty is deposited before the show cause notice is issued.
2. Imposition of penalty under Rule 57(I)(4) for fraudulent availing of MODVAT credit.
3. Enhancement of penalty by the Commissioner (Appeals) Central Excise.
4. Legality of imposing penalty despite the duty being deposited before the show cause notice.
5. Applicability of Section 11AC regarding intention to evade payment of duty.

Detailed Analysis:
1. The appeal challenged the order accepting the respondent's appeal and setting aside the penalty and interest imposed by the Adjudicating Authority. The issue was whether penalty and interest could be waived if duty was deposited before the issuance of the show cause notice, especially when the Central Excise law does not explicitly provide for such waiver. The Tribunal held that penalty and interest were not imposable in such cases, citing previous rulings. The revenue contended that mere deposit of duty did not absolve the liability to levy penalty if there was mens rea to evade payment of duty.

2. The case involved the detection of a shortage of inputs and wrongful availing of MODVAT credit by the assessee. The Adjudicating Authority confirmed the demand and imposed a penalty under Rule 173(Q) on the assessee. The Commissioner (Appeals) modified the penalty, and the Tribunal further ruled against the imposition of penalty and interest due to the duty being paid before the show cause notice.

3. The Commissioner (Appeals) enhanced the penalty under Rule 57(I)(5) of the Central Excise Rules 1944, which was challenged by the assessee before the Tribunal. The Tribunal's order relied on previous judgments and set aside the enhanced penalty and interest, leading to the revenue's appeal before the High Court.

4. The High Court referred to previous judgments and legal provisions to determine the legality of imposing a penalty when duty had been deposited before the issuance of the show cause notice. The Court emphasized the need to establish fraud or willful misstatement to justify the imposition of penalty, which was absent in the present case. The Court concluded that no substantial question of law necessitating the admission of the appeal arose, leading to the dismissal of the appeal.

5. The Court referred to Section 11AC regarding the intention to evade payment of duty, emphasizing the need to establish fraud, collusion, willful misstatement, or contravention of provisions to levy penalty. The Court highlighted that in the absence of such findings and with duty being paid before the show cause notice, no penalty was imposable under the law. The Court's decision was based on established legal principles and previous judgments, leading to the dismissal of the appeal.