2007 (3) TMI 267 - HC - Central Excise

Summary

Issues Involved:
1. Whether the Tribunal has discretion to reduce the penalty leviable u/s 11AC of the Central Excise Act, 1944.

Summary:

Issue 1: Tribunal's Discretion to Reduce Penalty u/s 11AC

1. D.B. Central Excise Appeal No. 61/06: The substantial question of law framed was whether the Tribunal has discretion to reduce the penalty leviable u/s 11AC of the Act. The penalty equal to short-levied duty was imposed with reference to Section 11AC, although the notice was given under Rule 173Q for alleged breach of the Rules.

2. D.B. Central Excise Appeal No. 13/2005: The question was whether the Tribunal is right in reducing the mandatory penalty imposable as equal to the amount of duty u/s 11AC. A show cause notice was issued for alleged short levy on excess stock found, and the adjudicating authority decided to levy penalty u/s 11AC.

3. D.B.O.T.R. No. 2/2005: The question of law was whether the Tribunal is empowered to reduce the mandatory penalty imposed u/s 11AC while upholding the demand of duty. The adjudicating authority imposed a penalty equal to the amount of duty short-levied u/s 11AC read with Rule 173Q.

4. D.B.O.T.R. No. 34/2004: The question was whether the Tribunal is empowered to reduce the mandatory penalty imposed u/s 11AC while upholding the demand of duty. The adjudicating authority imposed a penalty equal to the short-levied duty u/s 11AC read with Rule 173Q.

5. D.B. Central Excise Appeal No. 31/06: The question was whether the Tribunal is right in reducing the mandatory penalty imposable as equal to the amount of duty u/s 11AC. The Tribunal reduced the penalty to Rs. 25 lacs while confirming the demand.

6. D.B. Central Excise Appeal No. 52/2006: The question was whether the penalty leviable u/s 11AC is fixed and cannot be reduced or waived by the Tribunal once the finding that the penalty is leviable has been reached. The adjudicating authority imposed a penalty equal to the excess availment of Modvat credit by resorting to Section 11AC.

Legal Reasoning and Conclusion:

The Court noted that the phrase "equal to" used u/s 11AC denotes a comparable measure and does not leave discretion to reduce the penalty if it is found leviable. However, the Court also considered the Supreme Court's interpretation in the State of Madhya Pradesh case, which treated the penalty provision as a maximum limit, allowing discretion for lesser penalties.

The Court observed that Rule 173Q provides for penalties not exceeding the duty on excisable goods or Rs. 10,000, whichever is greater, and includes discretion for lesser penalties even for wilful contraventions. The Court concluded that Section 11AC read with Rule 173Q provides the true scope of penalty imposition, allowing discretion for lesser penalties.

The Court held that the Tribunal has the power to reduce the penalty imposable under Rule 173Q as well as Section 11AC. The limit of penalty u/s 11AC serves as a maximum limit, and the assessing officer may levy lesser penalties. The appeals were dismissed, affirming the Tribunal's discretion to reduce penalties.

Conclusion:

The Tribunal has the discretion to reduce the penalty imposable u/s 11AC of the Central Excise Act, 1944, considering the provisions of Rule 173Q and the context of each case. The appeals were dismissed, and the questions were answered in favor of the assessee and against the Revenue.