2014 (4) TMI 833 - HC - Customs

Liability for Penalty & Interest Deposition of Duty before issuance of show cause notice - Whether penalty and interest could be imposed when the duty had been deposited before the issuance of the show cause notice Judgment in Union of India v. Rajasthan Spg. Wvg. Mills 2009 (5) TMI 15 - SUPREME COURT OF INDIA and UNION OF INDIA V. DHARAMENDRA TEXTILE PROCESSORS 2007 (7) TMI 307 - SUPREME COURT OF INDIA followed - The Supreme Court has taken a view that the payment of duty/differential duty, whether before or after the show cause notice is issued cannot alter the liability for payment - The law laid down in the judgments relied upon by Tribunal in the impugned order is no more a good law and that it stands set aside - Appeal allowed wherein hardly ₹ 50,000/- penalty had been imposed - Accordingly, the order dated 12-07-2005 passed by the CESTAT in Appeal No.C/ 195/2004 is set aside - Decided against the assessee.

Summary

Issues:
1. Imposition of penalty and interest when duty is deposited before the show cause notice.

Analysis:
The judgment in question pertains to a Customs Appeal challenging an order that allowed three appeals, including the respondent's appeal, concerning the levy of penalty and interest. The Central Excise and Service Tax Appellate Tribunal (CESTAT) set aside the penalty and interest imposed by the Adjudicating authority and the Appellate Authority. The main issue before the CESTAT was whether penalty and interest could be imposed if the duty had been paid before the issuance of the show cause notice. The respondent's argument was centered on the fact that they had paid the duty before the notice was issued, thus contending they were not liable for penalty and interest.

The CESTAT based its decision on previous judgments of the High Court and the Supreme Court, which were cited in the impugned order. The learned counsels for both sides referred to the Supreme Court's decision in Union of India v. Rajasthan Spg. Wvg. Mills and a group of civil appeals, where it was held that the payment of duty, whether before or after the show cause notice, does not alter the liability for payment. Consequently, the legal position established in the judgments relied upon by the Tribunal in the impugned order was deemed outdated and set aside.

Ultimately, the High Court allowed the appeal, noting that a nominal penalty of Rs. 50,000 had been imposed. The order passed by the CESTAT in the respondent's appeal was set aside in light of the legal principles established by the Supreme Court and the clarification provided by the counsels regarding the liability for payment of duty, penalty, and interest irrespective of the timing of duty payment concerning the issuance of the show cause notice.