2013 (6) TMI 87 - HC - Central Excise

Penalty - benefit of reduced penalty of 25% u/s 11AC - option to avail - held that - in its adjudication order the adjudicating authority under the Act should explicitly state the options available to the Assessee under Section 11AC of the Act. Once the choices are made known to the Assessee and it still does not take advantage of the first proviso to Section 11AC of the Act, it will be entirely at its own peril. Therefore, it would be beneficial, both from the point of view of the Revenue as well as the Assessee, if the options available to the Assessee are mentioned in the adjudication order itself. It is seen that these proviso to section 11AC of the Act have been specifically inserted to ensure speedy recoveries of the disputed amount. It is an incentive given to the assessee that if he pays the duty amount along with interest, the penalty is reduced to 25% of the duty . This provision is beneficial to the department as well as the assessee as rightly pointed out by Delhi High Court in K.P. Pouches (P) Ltd. 2008 (1) TMI 296 - HIGH COURT OF DELHI . and therefore, the assessee should be made aware of the option available to him. It will be open to the appellant assessee to deposit 25% of the penalty determined by the adjudicating authority within 30 days from today to avail benefit of reduced penalty under Second Proviso to Section 11AC of the Act. - decided in favor of assessee.

Summary

Issues:
1. Delay in filing appeal due to misplaced file.
2. Entitlement to benefit of First Proviso to Section 11 AC of the Central Excise Act, 1944.
3. Imposition of penalty under Section 11AC.
4. Clarification on the obligation of the adjudicating authority to mention the reduced penalty option in the order in original.

Analysis:

1. The delay in filing the appeal was attributed to the misplaced file by the counsel's staff. The appellant explained the delay as unintentional, leading to the delay condonation application being allowed, and the appeal being given a regular number.

2. The main issue revolved around the entitlement of the appellant to the benefit of the First Proviso to Section 11 AC of the Central Excise Act, 1944. The appellant, engaged in manufacturing transformers, faced a shortage of materials detected during a stock verification. The appellant promptly deposited the Central Excise Duty and contested the subsequent penalty imposition.

3. The key legal question was whether the penalty under Section 11AC was rightly imposed on the appellant. The appellant argued against the penalty, citing the absence of deliberate deception with intent to evade duty. The appellate authorities had varied in their decisions, with the Tribunal ultimately restoring the penalty.

4. The judgment highlighted the obligation of the adjudicating authority to explicitly state the options available to the assessee under Section 11AC in the order in original. The Delhi High Court's ruling emphasized the necessity of mentioning the reduced penalty option to enable the assessee to avail of the benefit within the stipulated timeframe.

In conclusion, the judgment allowed the appellant to deposit 25% of the penalty within 30 days to benefit from the reduced penalty under the Second Proviso to Section 11AC. The decision aligned with the directive to ensure that adjudication orders explicitly mention the options available to the assessee regarding penalty payments, as mandated by the relevant circular issued to rationalize the provision of Section 11AC.