2009 (7) TMI 318 - AT - Central Excise

Penalty imposed on them under Section 11AC - payment of duty before issuance of show-cause notice determination of duty under sub-section (2) of section 11A arises only when SCN issued SCN can be issued for amount short paid even after duty payment by assessee but no such short payment in impugned case payment of duty was made by the appellant in the present case and the same was intimated to the proper officer of Central Excise. In the circumstances, there was no reason to issue any show-cause notice to the appellant in respect of the duty paid by them.. show-cause notice was issued in breach of the injunction contained in sub section (2B) of Section 11A. - Section 11AC of the Central Excise Act was erroneously invoked against the appellant - determination of duty by the proper officer of Central Excise under sub section (2) of Section 11A of the Central Excise Act is a pre-requisite for imposing penalty under Section 11AC of the Act; - No such penalty can be imposed unless one or more of the requirements laid down under Section 11AC are satisfied in a given case; - Penalty under Section 11AC of the Act cannot be avoided by mere reason of the duty having been paid prior to issue of show-cause notice; - appeal is allowed

Summary

Issues:
Penalty imposition under Section 11AC of the Central Excise Act based on duty payment prior to show-cause notice issuance.

Analysis:
The appeal challenges a penalty imposed on the assessee under Section 11AC of the Central Excise Act for not paying duty on their final product during a period when they availed themselves of SSI benefit. The department issued a show cause notice demanding duty, interest, and penalty. The original authority confirmed the duty demand but did not impose a penalty. Upon review, the Commissioner (Appeals) imposed a penalty of Rs. 6.75 lakhs under Section 11AC, leading to the present appeal.

The appellant argued that as they paid duty with interest before the show cause notice, they should not be penalized under Section 11AC. They cited the Supreme Court's judgment in UOI v. Rajasthan Spinning & Weaving Mills, emphasizing the need for a duty determination under Section 11A(2) before imposing a penalty under Section 11AC. The SDR, however, relied on the same judgment to argue that duty determination is not contingent on the timing of duty payment.

The Tribunal analyzed the legal provisions and judgments cited. It noted that duty payment before the show cause notice does not exempt from penalty under Section 11AC. However, the determination of duty under Section 11A(2) is crucial for penalty imposition. In this case, duty was paid before the notice, but the show cause notice proposed to appropriate this payment, contrary to Section 11A(2B). As no duty determination occurred, the penalty under Section 11AC was incorrectly invoked.

The Tribunal highlighted the importance of a duty determination by a Central Excise officer under Section 11A(2) for imposing a penalty under Section 11AC. It distinguished cases where duty payment was voluntary from those where it was at the instance of the department. The appellant's compliance with Section 11A(2B) precluded the need for a duty determination and, consequently, the applicability of Section 11AC for penalty imposition.

In conclusion, the Tribunal set aside the penalty imposed under Section 11AC, ruling in favor of the appellant based on the absence of a duty determination under Section 11A(2). The judgment emphasized the legal prerequisites for penalty imposition and the specific circumstances of duty payment and notice issuance in this case.