2010 (8) TMI 99 - HC - Central Excise

Penalty would be 25% and mandatory penalty of 100% would not be applicable if the duty was paid within 30 days of the order raising demand- High court upheld the decision of the Tribunal that penalty would be 25% if the duty was paid within 30 days of the order raising demand as per proviso to section 11AC,

Summary

Issues:
1. Reduction of penalty by the appellate authority.
2. Applicability of proviso to Section 11AC of the Central Excise Act, 1944.

Reduction of Penalty by Appellate Authority:
The appeal before the High Court was filed by the revenue under Section 35G of the Central Excise Act, 1944, challenging the order of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT). The main issue raised was whether the CESTAT, being a lower authority than the Supreme Court, was correct in reducing the penalty imposed by the adjudicating authority to 25% in contravention of the statutory provisions under Section 11AC of the Act. The Tribunal had reduced the penalty to 25% based on the specific circumstances of the case, where the duty was paid even before the show cause notice was issued. The High Court observed that since the duty was duly paid as per the proviso to Section 11AC, the mandatory penalty of 100% was not applicable, and the penalty was correctly reduced by the Tribunal. Therefore, the High Court found no substantial question of law arising from this issue and dismissed the appeal.

Applicability of Proviso to Section 11AC:
The High Court addressed the issue of the applicability of the proviso to Section 11AC of the Central Excise Act, 1944. The assessee, engaged in the manufacture of shawls, was found to have engaged in clandestine removal of goods during a visit by the preventive staff of the Department. A show cause notice was issued, and after adjudication, duty payment was confirmed along with the imposition of a penalty. The appellate authority upheld the duty demand but reduced the penalty. The Tribunal further reduced the penalty to 25% under the proviso to Section 11AC, considering that the duty was paid before the show cause notice and within 30 days of the order raising the demand. The High Court concurred with the Tribunal's interpretation, stating that in situations where duty is paid as per the proviso to Section 11AC, the mandatory penalty of 100% does not apply. Therefore, the High Court found no grounds to interfere with the Tribunal's decision on the penalty amount and dismissed the appeal.

In conclusion, the High Court upheld the Tribunal's decision regarding the reduction of penalty under the proviso to Section 11AC of the Central Excise Act, 1944. The Court emphasized that the penalty was correctly reduced to 25% due to the timely payment of duty, in accordance with the statutory provisions. The appeal filed by the revenue was dismissed as no substantial questions of law were found to arise from the issues raised in the case.