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Issues involved: Imposition of penalty under Section 11AC and recovery of interest under Section 11AB u/s Central Excise Act, 1944.
Summary: 1. The Commissioner imposed a penalty of Rs. 40 lakhs on the appellants and ordered recovery of interest @18% per annum u/s 11AB for clearing goods without sufficient balance in PLA, acting with malafide intention u/s 11AC. 2. Appellants, manufacturers of aerated waters, took credit of Rs. 30 lakhs in PLA without TR 6 challan, cleared goods without sufficient balance, leading to show cause notice for contravention of Rules 9(1) and 173G(1). 3. Commissioner found appellants cleared goods without sufficient balance in PLA, rejecting their explanation of delay in cheque clearance, holding their actions as malafide to evade duty, invoking Sections 11AB and 11AC. 4. Appellants argued no duty demand existed, hence penalty u/s 11AC not applicable without prior duty liability determination u/s 11A(1) and (2), seeking setting aside of the order. 5. Respondent argued appellants' subsequent deposit in PLA did not absolve them of duty liability, supporting penalty imposition u/s 11AC and interest recovery u/s 11AB, citing contravention of Rule 173G(1). 6. Tribunal found penalty under Section 11AC unsustainable without prior duty determination u/s 11A(2), thus rejecting the imposition of penalty and interest recovery. 7. Consequently, the demand for interest under Section 11AB was deemed untenable, while the penalty under Rule 173Q for contravention of Rule 173G(1) was reduced to Rs. One lakh. 8. Despite contravention of Rule 173G(1), penalty under Rule 173Q was reduced considering appellants' circumstances, modifying and upholding the impugned order to that extent. 9. The appeal was disposed of accordingly, with any consequential benefits to the appellants under the law.
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