2004 (4) TMI 152 - AT - Central Excise

Summary

Issues: Revenue challenging setting aside of penalty and interest under Section 11AC by Commissioner (Appeals)

In this case, the issue revolved around the challenge by the Revenue against the setting aside of the mandatory penalty under Section 11AC and interest imposed on the respondents by the adjudicating authority. The respondents had crossed the exemption limit but continued to clear goods without payment of duty and did not register with the Central Excise Department. The adjudicating authority confirmed the duty demand and imposed penalties. The Commissioner (Appeals) modified the order by setting aside the penalties. The key argument was that the respondents were ignorant of the law and had no intention to evade payment of duty. However, the Tribunal held that the payment of duty before the show cause notice was not voluntary but a result of being caught by the Department. The provisions of Section 11AC are mandatory in cases of duty evasion, and penalty must be imposed. The Tribunal set aside the Commissioner's order and reduced the penalty imposed by the adjudicating authority to Rs. 50,000, while also holding the respondents liable to pay interest from the due date.

The first issue addressed was the challenge by the Revenue against the setting aside of penalties under Section 11AC and interest imposed on the respondents. The Tribunal noted that the respondents had crossed the exemption limit, failed to pay duty, and did not register with the Central Excise Department. The adjudicating authority confirmed the duty demand and imposed penalties, which were modified by the Commissioner (Appeals). The Tribunal rejected the argument that the respondents were ignorant of the law and had no intention to evade payment, emphasizing that the duty payment before the show cause notice was not voluntary. It held that penalties under Section 11AC are mandatory in cases of duty evasion, and interest must be paid under Section 11AB. The Tribunal set aside the Commissioner's order and reduced the penalty imposed by the adjudicating authority to Rs. 50,000, while also holding the respondents liable to pay interest from the due date.

The second issue involved the contention that the duty payment before the show cause notice and the respondents' alleged ignorance of crossing the exemption limit justified setting aside the penalties. The Tribunal rejected this argument, stating that the duty payment, in this case, was not voluntary as it was made only after the Department caught the respondents. While acknowledging the duty payment as a mitigating factor for imposing a lesser penalty, the Tribunal emphasized the mandatory nature of penalties under Section 11AC in cases of duty evasion. It held that the penalties and interest imposed by the adjudicating authority were justified, setting aside the Commissioner's order and reducing the penalty amount to Rs. 50,000, while also ordering the respondents to pay interest from the due date.

In conclusion, the Tribunal addressed the issues raised by the Revenue challenging the setting aside of penalties and interest under Section 11AC. It emphasized the mandatory nature of penalties in cases of duty evasion and rejected the argument that the duty payment before the show cause notice justified setting aside the penalties. The Tribunal set aside the Commissioner's order, reduced the penalty imposed by the adjudicating authority, and held the respondents liable to pay interest from the due date.