2014 (7) TMI 882 - HC - Central Excise

Penalty u/s 11AC - whether mandatory - clandestine clearance of goods - Held that - In view of the categorical statement of law by the Supreme Court in the above-stated decision Union of India V. Rajasthan Spinning and Weaving Mills 2009 (5) TMI 15 - SUPREME COURT OF INDIA , the question of exonerating the assessee from payment of penalty does not arise. - Decided in favor of revenue.

Summary

Issues:
Levy of penalty under Section 11AC of the Central Excise Act.

Analysis:
The appeal was filed against the Final Order No.480 of 2007 dated 04.05.2007 on the file of the CESTAT. The substantial question of law admitted by the Court was whether the Tribunal was correct in setting aside the penalty imposed under Section 11AC on the ground of clandestine clearance of excisable goods. The issue revolved around the penalty levied under Section 11AC of the Central Excise Act. The Tribunal disposed of the appeal after dispensing with the pre-deposit, relying on a previous decision and the fact that duty was paid by the assessee before the issuance of the show cause notice. The Revenue, aggrieved by this decision, filed the present appeal challenging the Tribunal's order.

The Supreme Court's decision in Union of India v. Rajasthan Spinning and Weaving Mills clarified that the mere payment of differential duty, whether before or after the show cause notice, does not absolve the party from liability for penalty under Section 11AC of the Act if the conditions for imposing such penalty are met. The Court emphasized that the assessee cannot be exonerated from paying the penalty based on the aforementioned legal position. Consequently, the appeal was allowed, and the question of law was answered in favor of the Revenue. However, the assessee was granted any other benefit as per the proviso to Section 11AC of the Central Excise Act. As a result, the Civil Miscellaneous Appeal was allowed, the Tribunal's order was set aside, and no costs were awarded in this matter.