2015 (9) TMI 825 - HC - Central Excise

Mandatory penalty - Whether the Tribunal can override the statutory provisions enshrined in the law in as much as the second proviso to Section 11AC of Central Excise Act, 1944, has been ignored in reducing the penalty wherein specific provisions are enlisted that the benefit of reduced penalty shall be available only when penalty is paid within 30 days of the date of communication of the Order which is not the case in the present matter - Held that - The central excise duty is payable on the manufacture of excisable goods. It is not payable on the issuance of the show cause notice, or at any time thereafter. The Proviso to Section 11AC is applicable, if the payment is made within 30 days of communication of the order levying penalty, and not from the date of issuance of the show cause notice - The judgment was rendered on equity, which is not applicable to the laws relating to central excise. The observation that since duty was deposited prior to the show cause notice, penalty could not be levied, is contrary to the principles settled in the central excise laws. - The judgment was rendered on equity, which is not applicable to the laws relating to central excise. The observation that since duty was deposited prior to the show cause notice, penalty could not be levied, is contrary to the principles settled in the central excise laws. - Decided in favour of Revenue.

Summary

Issues: Central Excise Appeal under Section 35-G - Interpretation of second proviso to Section 11AC of Central Excise Act, 1944 - Reduction of penalty based on payment timeline.

Analysis:

1. Issue of Statutory Interpretation: The central issue in this case revolves around the interpretation of the second proviso to Section 11AC of the Central Excise Act, 1944. The main contention is whether the Tribunal can override statutory provisions when reducing the penalty. The Tribunal reduced the penalty based on the first Proviso to Section 11AC, which allows for a penalty reduction to 25% if the duty demanded is paid within 30 days of the order. However, the Central Excise Department argues that the reduction should be based on payment within 30 days from the date of communication of the order determining the duty, not from the date of the show cause notice.

2. Factual Background: The case involves an assessee engaged in the manufacturing of PVC Leather cloth. Various instances of duty shortages and discrepancies were detected during stock verifications conducted by Central Excise Officers. The appellant admitted to the shortages and deposited the duty amounts accordingly. Show cause notices were issued, and penalties were imposed by the Original Authority and upheld by the Commissioner (Appeals).

3. Tribunal's Decision: The Tribunal, citing precedents from different High Courts, relied on the first Proviso to Section 11AC and reduced the penalty to 25% of the duty amount. The Tribunal's decision was based on the provision that allows for penalty reduction if the duty demanded is paid within 30 days of the order.

4. Legal Arguments: The Central Excise Department contends that the Tribunal erred in reducing the penalty based on the date of order instead of the date of communication of the order determining the duty. The Department highlights the unamended provisions of Section 11AC and argues that the reduction to 25% should be based on payment within 30 days from the communication of the duty order, not the issuance of the show cause notice.

5. Precedent Analysis: The Department argues against the reliance on certain precedents by the assessee, stating that those cases did not consider the first Proviso to the unamended Section 11AC. The Department asserts that the payment timeline for penalty reduction must align with the communication of the duty order, not the issuance of the show cause notice.

6. Decision and Outcome: The Court rules in favor of the Central Excise Department, concluding that the reduction in penalty to 25% should be based on payment within 30 days of the communication of the order levying the penalty, not from the date of the show cause notice. The appeals are allowed, and the Department is directed to proceed with the issue of demand based on the judgment.

In conclusion, the judgment clarifies the interpretation of the second proviso to Section 11AC of the Central Excise Act, emphasizing the importance of the payment timeline in determining penalty reductions.