2006 (7) TMI 23 - HC - Central Excise

Central Excise Duty paid prior to issue of show cause notice The question of interest and imposed penalty not determined by the Commissioner (Appeals) and Tribunal Matter remanded back for fresh decision of Commissioner (Appeals) on penalty and Tribunal on interest liability

Summary

Issues:
1. Alleged clandestine removal of finished goods without payment of duty.
2. Imposition of penalty under Section 11AC.
3. Applicability of penalty despite prior deposit of duty.
4. Interpretation of statutory provisions regarding penalty.

Analysis:

1. The respondent, a manufacturer of polypropylene compounding, faced allegations of clandestinely removing finished goods without issuing invoices or paying duty. A show cause notice was issued under Section 11A of the Central Excise Act, 1944, seeking explanation for additional duty and penalty imposition.

2. The adjudicating authority found the respondent guilty of surreptitious removal of goods without following prescribed procedures or paying duty. Despite depositing the duty before the show cause notice, a penalty of Rs. 1,12,900/- was imposed under Section 11AC. The Commissioner, Central Excise (Appeal), however, set aside the penalty citing the duty deposit before the notice issuance.

3. The revenue contested the decision, arguing that the mere deposit of duty did not absolve the liability for penalty if there was an intent to evade payment. The Tribunal dismissed the revenue's appeal, emphasizing the importance of mens rea in penalty imposition.

4. The court analyzed Section 11AC, which mandates penalties for non-payment of duty due to fraud, collusion, or wilful misstatement. The provision allows for reduced penalties if duty and interest are paid within a specified timeframe. The court clarified that depositing duty before a show cause notice does not automatically negate penalty liability under Section 11AC.

5. The court referred to statutory provisions, including Section 11A, to determine the applicability of penalty despite duty deposit before notice issuance. The case was remanded to the Commissioner (Appeals) for a fresh decision on penalty imposition based on whether the non-payment of duty was due to fraudulent intent or contravention of excise laws.

6. The court directed the parties to appear before the Commissioner (Appeals) for further proceedings, highlighting the importance of determining the circumstances leading to non-payment of duty and the intent behind such actions as per Section 11AC.