2024 (10) TMI 1460 - AT - Central Excise

Justification of reduced penalty - setting aside refund sanction by Assistant Commissioner due to penalty reduction - HELD THAT - A perusal of section 11AC of the Central Excise Act shows that the section itself provides for penalty equal to 100% and further provides that if the demand is paid along with penalty within 30 days of the order, the penalty shall be only 25%. Thus, both the penalty of 100% and its reduction to 25% on fulfilment of some conditions are mandatory. Even if penalty of 100% is imposed and it is not mentioned in the order in original that the penalty shall stand reduced to 25% if the duty, interest and penalty were paid within 30 days, if the assessee pays within 30 days and thereby fulfils the requirements for reduction of penalty, it will be entitled to that reduction. In this case, the Commissioner did indicate in his order about reduction of penalty but the Tribunal did not mention it in its order. However, that does not mean that the Tribunal has enhanced the penalty to 100% even though the appellant had fulfilled the conditions for reduced penalty. The Commissioner (Appeals) clearly mis-read the Tribunal s order and on that ground set aside the refund sanctioned by the Assistant Commissioner. The impugned order is set aside - the order of the Assistant Commissioner is restored - appeal allowed.

Summary

Issues:
Appeal against order-in-appeal setting aside refund sanction by Assistant Commissioner due to penalty reduction misinterpretation.

Analysis:
The appellant, a manufacturer registered with the Central Excise department, received a show cause notice leading to demands for disallowance of CENVAT credit, penalty, and other charges. The Commissioner confirmed some demands, including penalty under section 11AC. On appeal, the Tribunal set aside one demand but upheld the penalty. The Commissioner's order mentioned a penalty reduction to 25% if paid within 30 days, but the Tribunal's order did not specify this. The appellant claimed to have paid the duty and penalty within 30 days.

The impugned order by the Commissioner (Appeals) questioned the refund sanction by the Assistant Commissioner, citing the Tribunal's confirmation of the penalty without mentioning the 25% reduction clause. The Commissioner (Appeals) held that the penalty under section 11AC should be considered in full, not reduced to 25%, as the Tribunal order did not explicitly state the reduction clause. Therefore, the refund was deemed wrongly sanctioned by the Assistant Commissioner.

Upon review, the Tribunal noted that section 11AC mandates a penalty equal to 100%, with a provision for reduction to 25% if paid within 30 days of the order. Even if the Tribunal did not specify the reduction in its order, fulfilling the payment conditions entitles the appellant to the reduced penalty. The Commissioner (Appeals) misinterpreted the Tribunal's order, leading to the set-aside of the refund sanctioned by the Assistant Commissioner.

Consequently, the Tribunal allowed the appeal, setting aside the impugned order and reinstating the Assistant Commissioner's order of refund sanction. The decision was pronounced in open court on 28/10/2024.