2006 (9) TMI 113 - HC - Central Excise

Penalty - though, mere deposit of duty short levied before show cause notice may not be conclusive but if there was no intention to evade, penalty is not attracted - revenue is unable to show that there was any element of mens rea on the part of the assessee penalty u/s 11AC set aside

Summary

Issues:
1. Imposition of penalty under Section 11AC of the Central Excise Act, 1944.
2. Levying interest under Section 11AB in cases under the purview of explanation to sub-section (2B) of Section 11A where duty is deposited before the issue of Show Cause Notice.

Analysis:
1. The case involved the imposition of penalty under Section 11AC of the Central Excise Act, 1944. The appellant, an assessee, was found to have short-levied excise duty on parts of washing machines sold to its branches/service centers. The appellant voluntarily debited the short-levied amount with interest. The Tribunal set aside the penalty imposed by the adjudicating authority, citing that since the duty was paid before the issuance of the Show Cause Notice, the penalty was not justified. The court referred to previous judgments emphasizing that penalty under Section 11AC requires mens rea, and if there was no intention to evade, the penalty is not warranted. The court cited the case of Commissioner of Central Excise Delhi-III v. M/s. Machino Montell (I) Limited to support this principle.

2. Regarding the issue of levying interest under Section 11AB in cases under the purview of explanation to sub-section (2B) of Section 11A, the court found that there was no element of mens rea on the part of the assessee based on the findings of the adjudicating authority, appellate authority, and the Tribunal. The court referred to judgments by the Hon'ble Supreme Court in Hindustan Steel Limited v. State of Orissa and Commissioner of Income-tax, West Bengal v. Anwar Ali, emphasizing the requirement of mens rea for the imposition of penalties. The court upheld the Tribunal's decision, concluding that no substantial question of law arose and dismissed the appeal.

In summary, the court dismissed the appeal, ruling that the penalty under Section 11AC was not justified due to the lack of mens rea on the part of the assessee, and upheld the decision regarding the imposition of interest under Section 11AB in cases where duty was deposited before the issuance of the Show Cause Notice.