2010 (1) TMI 457 - HC - Central Excise

Penalty - payment of duty before the issuance of SCN. Tribunal holding that bonafides of assessee indicated in their letter to superintendent of Central Excise seeking for guidance/advice as to duty liability and was also pursuing matter with federation of Hotels and Restaurants Association of India. Duty liability not disputed. Held that - no intention to evade payment of duty not to suppress any facts. Penalty in each case dependent on facts and circumstances of particular set of facts prevailing. Appeal against Tribunal order set side penalty not admissible.

Summary

Issues:
Levy of penalty under Section 11 of the Central Excise Act, 1944 based on suppression of dutiable turnover of confectionery products liable to excise duty.

Analysis:
The appeal before the Karnataka High Court involved the Commissioner of Central Excise challenging the order of the Central Excise & Service Tax Appellate Tribunal (CESTAT) regarding the levy of penalty on the respondent-assessee under Section 11 of the Central Excise Act, 1944. The respondent, a franchisee of a hotel chain, had doubts about the liability to pay excise duty on their confectionery products. The central excise authorities issued a show cause notice demanding duty payment for clearances made from 2002 to 2006, alleging suppression of dutiable turnover. The respondent had already paid the duty before the notice but contested the penalty imposition, claiming lack of deliberate suppression. The adjudicating authority still levied a penalty under Section 11AC of the Act. The appellate commissioner upheld the penalty, leading the respondent to appeal to the Tribunal under Section 35B of the Act.

The Tribunal analyzed the case, finding no deliberate attempt to evade duty by the respondent. The Tribunal noted the respondent's efforts to seek guidance on duty liability in 1997, indicating good faith. The Tribunal concluded that the respondent had paid the duty before the show cause notice, showing no intention to evade payment. Consequently, the Tribunal set aside the penalty. The Excise Department appealed the Tribunal's decision to the High Court under Section 35G of the Act.

During the High Court proceedings, the appellant argued that the law mandated penalty under Section 11AC when the extended period of limitation under Section 11A was invoked. Citing a Supreme Court judgment, the appellant contended that penalty was inevitable in such cases. However, the High Court disagreed, stating that penalty imposition depended on the specific facts and circumstances of each case. The High Court accepted the Tribunal's findings as facts and concluded that Section 11AC was not applicable in this case. The High Court distinguished the Supreme Court judgment cited by the appellant and upheld the Tribunal's decision, dismissing the appeal.

In summary, the High Court upheld the Tribunal's decision to set aside the penalty imposed on the respondent, emphasizing that the facts did not warrant penalty under Section 11AC of the Central Excise Act, 1944. The judgment highlighted the importance of assessing each case's unique circumstances when determining penalty imposition for duty evasion or suppression.