2009 (7) TMI 1136 - AT - Central Excise

Clandestine removal - invocation of section 11AC - Held that - there is no contest to duty confirmation on the findings of clandestine removal by the assessee. As such, it stands established that the duty was not paid on account of suppression of facts, in which case the provisions of Section 11AC would get invoked - as per first proviso of said Section 11AC, if duty determined along with interest and 25% penalty is paid within 30 days, the balance amount of penalty is waived.

Issues Involved:
1. Clandestine removal and confirmation of duty demand.
2. Imposition and reduction of penalty under Section 11AC.
3. Applicability of the first proviso to Section 11AC.
4. Harmonious construction of Section 11AC and Section 35F.
5. Interest rate confirmation.

Issue-wise Detailed Analysis:

1. Clandestine Removal and Confirmation of Duty Demand:
The Original Adjudicating Authority confirmed a duty demand of Rs. 2,19,157/- against the assessee on findings of clandestine removal, along with interest under Section 11AB. This decision was upheld by the Commissioner (Appeals), indicating that the duty was not paid due to suppression of facts, invoking Section 11AC.

2. Imposition and Reduction of Penalty under Section 11AC:
The Original Adjudicating Authority imposed a penalty equal to the duty amount under Rule 25 of the erstwhile Central Excise Rules, 2001, read with Section 11AC. The Commissioner (Appeals) upheld the penalty but provided an option to pay a reduced penalty of 25% of the duty amount within 30 days of the receipt of his order. The Revenue contested this, arguing that the benefit of the first proviso to Section 11AC is applicable only if the entire duty, interest, and 25% of the penalty are paid within 30 days of the order by the Central Excise officers.

3. Applicability of the First Proviso to Section 11AC:
The Tribunal emphasized that the first proviso to Section 11AC requires the payment of duty, interest, and 25% of the penalty within 30 days from the date of communication of the order by the Central Excise Officer. The determination of duty under sub-section (2) of Section 11A by the Central Excise Officer is crucial. Therefore, the benefit of the reduced penalty is only available if the payment is made within 30 days from the order of the Original Adjudicating Authority, not from the appellate order.

4. Harmonious Construction of Section 11AC and Section 35F:
The Commissioner (Appeals) referenced Section 35F, which deals with the pre-deposit of duty and penalties levied, to justify the extension of the period to deposit the reduced penalty. However, the Tribunal found this reasoning flawed as both sections operate in different fields. Section 11AC automatically reduces the penalty to 25% if deposited within 30 days, whereas Section 35F pertains to pre-deposit requirements for appeals.

5. Interest Rate Confirmation:
The Commissioner (Appeals) confirmed the interest at 13% per annum, while the applicable rate during the relevant period was 24% per annum. The Tribunal directed that the interest be confirmed in accordance with the prevailing rates during the relevant time.

Conclusion:
The Tribunal concluded that the benefit of the first proviso to Section 11AC is strictly available only if the duty, interest, and 25% of the penalty are paid within 30 days from the date of communication of the Original Adjudicating Authority's order. The option given by the Commissioner (Appeals) to deposit 25% of the penalty within 30 days of his order was upheld due to the peculiar facts and circumstances of the case. The interest rate was directed to be confirmed as per the prevailing rates during the relevant period. The Revenue's appeal was disposed of accordingly.

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