2016 (10) TMI 277 - SC - Central Excise

Quantification of penalty - power to tribunal to reduce the penalty u/s 11AC below the amount of confirmed duty - Held that - on the basis of language of Section 11AC of the Act, the submission of the revenue is meritorious. - the Tribunal could not reduce the penalty for an amount lesser than the duty which has been upheld. The duty in respect of two demands comes to ₹ 40,44,720/-. Therefore, going by the provisions of Section 11AC of the Act, the penalty should also have been ₹ 40,44,720/- and not ₹ 20 lakhs. - Decided in favour of Revenue

Summary

Issues:
- Special leave to appeal limited to the question of penalty.
- Adjudication of duty demands and penalty imposition.
- Interpretation of Section 11AC of the Central Excise Act.
- Reduction of penalty by the Tribunal.

Analysis:

In this case, the Supreme Court granted special leave to appeal limited to the question of penalty. The Show Cause Notice issued by the Department raised three duty demands: duty demand based on Delivery Challans, duty demand based on duplicate invoices, and duty demand based on diaries seized during investigation. The Tribunal set aside one duty demand but maintained the other two, reducing the penalty to ?20 lakhs. The appellant argued that as per Section 11AC of the Central Excise Act, the penalty should be equal to the duty determined. Section 11AC states that the penalty shall be equal to the duty determined in cases of fraud or suppression of facts. The appellant contended that since the duty upheld amounted to ?40,44,720, the penalty should also be the same, not ?20 lakhs as reduced by the Tribunal.

The Court found merit in the appellant's submission, concluding that the penalty should indeed be equal to the duty determined. As the duty upheld was ?40,44,720, the penalty should also be the same amount. Therefore, the Court allowed the appeal to the extent that the respondent was directed to pay a penalty of ?40,44,720. The already paid ?20 lakh would be adjusted, and the balance penalty amount was to be paid by the respondent within two months. The appeal was disposed of accordingly, emphasizing the strict adherence to the provisions of Section 11AC of the Act in determining penalties for duty evasion or non-payment.