2010 (8) TMI 102 - HC - Central Excise

Penalty under section 11AC- The assessee availed the CENVAT Credit on the purchase of goods for repair purpose. The department disapproved the credit and reaised the demand and equal amount of penalty. Tribunal upheld the demand and reduced the penalty. Court remanded the case to the tribunal for fresh decision stating that penalty is not justified if there is no concealment. If there is concealment, penalty had to be at the rate mentioned in section 11AC.

Summary

Issues:
Reduction of penalty under Section 11AC of the Central Excise Act, 1944 by the Customs, Excise & Service Tax Appellate Tribunal.

Analysis:
The appeal before the High Court was filed by the revenue under section 35G of the Central Excise Act, 1944 against an order passed by the Customs, Excise & Service Tax Appellate Tribunal, New Delhi. The substantial questions of law proposed to be raised included whether the reduction in penalty imposed under Section 11AC of the Act was justifiable when the demand confirmed had been upheld. The respondent, a cooperative society under the Punjab Cooperative Societies Act, 1961, availed CENVAT credit for excise duty paid while purchasing goods, but the department objected to the credit for goods purchased for repair purposes. The Tribunal upheld the demand and imposed a penalty under section 11AC of the Act, which was later reduced to Rs.1 lac on appeal, leading to the issue at hand.

The main contention raised on behalf of the appellant was that under section 11AC of the Act, the penalty could not be less than 100%. However, the respondent argued that there was no case for penalty as there was no concealment, only a debatable issue regarding the admissibility of input credit. The High Court noted that the Tribunal's order lacked a finding of concealment by the assessee. It was emphasized that if a matter falls under section 11AC, the penalty must be at the minimum rate specified therein. Since there was no finding to that effect, the penalty reduction to Rs.1 lac was deemed unjustified. Therefore, the High Court set aside the order reducing the penalty and remanded the matter to the Tribunal for a fresh decision on the penalty issue in accordance with the law. The parties were directed to appear before the Tribunal for further proceedings.

In conclusion, the High Court disposed of the appeal, highlighting the error in the Tribunal's order regarding the reduction of penalty under section 11AC of the Central Excise Act, 1944. The judgment focused on the necessity for a proper finding of concealment to justify the imposition of penalties as per the statutory provisions, emphasizing the importance of adherence to legal requirements in such matters.