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2007 (7) TMI 326 - HC - Central Excise

Issues involved: Interpretation of penalty provisions under Section 11AC of the Central Excise Act, 1944.

Summary:
The High Court of Judicature of Bombay at Aurangabad heard a case where a show cause notice was issued to the respondent-assessee demanding an amount along with penalty under Section 11AC of the Act. The assessee did not respond, leading to confirmation of the demand and imposition of penalty by the Deputy Commissioner. The Department appealed to enhance the penalty, citing a Supreme Court decision. The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) refused to follow the decision, leading to the admission of the appeal by the High Court on the question of whether there is discretion under Section 11AC to impose a penalty less than the duty evaded.

The High Court analyzed Section 11AC and noted that the legislature did not set upper or lower limits for the penalty, requiring it to be equal to the duty evaded intentionally. Even with a proviso allowing for a reduced penalty if duty and interest are paid promptly, the authority has no discretion to impose a penalty different from the duty evaded. The Court referred to a previous case to support this interpretation.

The Court justified the stringent penalty provisions under Section 11AC, emphasizing that it applies only to intentional duty evasion through fraud or collusion. The penalty is considered a form of punishment for deliberate evasion, with no room for discretion in imposing a penalty different from the evaded duty.

Ultimately, the High Court accepted the argument that under Section 11AC, no discretion is allowed in imposing a penalty, directing the imposition of a penalty equivalent to the duty evaded on the respondent-assessee.

In conclusion, the appeal was allowed, and the penalty equivalent to the duty evaded was imposed on the respondent-assessee, disposing of the first appeal accordingly.

 

 

 

 

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