2010 (6) TMI 86 - HC - Central Excise

Penalty u/s 11AC mandatory penalty - While dealing with the penalty imposed by the Original Authority, the Tribunal has noted that in respect of the re-rolling mills, the respondent had paid the duty in excess than what was payable - they were not liable to pay any further duty on re-rolling mills and accordingly, dropped the entire demand of duty of Rs.71,23,219/- in respect of re-rolling mills as claimed in the show cause notice. tribunal also , held that no penalty can be imposed. Held that - the conclusion of the Tribunal in having held that there was no scope to invoke Section 11AC of the Act, in order to levy a further penalty on the respondent cannot be found fault with

Summary

Issues:
Challenge to the order of the Tribunal regarding the deletion of penalty under Section 11AC of the Central Excise Act.

Analysis:
The Commissioner of Central Excise appealed against the Tribunal's order dated 06.11.2009, challenging the deletion of penalty. The main question raised was whether the Tribunal was correct in concluding that no penalty was imposable despite the Supreme Court's ruling in Union of India vs. M/s. Dharamendra Textile Processors (2008 [231] CLT 3 (SC)) that no discretion is available on the quantum of penalty under Section 11AC of the Central Excise Act.

The Tribunal examined the Original Authority's order dated 31.10.2003, which determined that a certain amount was payable for a specific period. It was found that the respondent had actually paid more than the duty leviable, leading to the conclusion that no further duty was owed. The Tribunal noted that there was no mens rea in the respondent's conduct regarding the payment of duty, which influenced their decision not to impose a penalty.

Referring to the Supreme Court's decision in Union of India vs. Rajasthan Spinning and Weaving Mills (2009 (238) ELT 3 (SC)), the Tribunal emphasized that once Section 11AC is applicable in a case, there is no discretion in quantifying the penalty, and it must be equal to the duty determined under the Act. This interpretation was further supported by the subsequent decision in SKF India Pvt. Ltd. vs. Commissioner of Central Excise (239 ELT 385), following the same principles.

Based on the legal precedents set by the Supreme Court in the mentioned cases, the High Court found no fault with the Tribunal's conclusion that there was no scope to invoke Section 11AC to levy a further penalty on the respondent. Consequently, the appeal was dismissed as the order in question was in line with the established legal principles.