2017 (1) TMI 364 - AT - Central Excise

Imposition of penalty u/s 11AC of the Central Excise Act, 1944- Rule 6(3) Cenvat Credit Rules, 2004 - whether imposition of penalty justified, when there was no demand of duty made? - Held that - I have gone through the show cause notice which has been issued only to impose under Section 11AC of the Act. As there is no demand of duty in the show cause notice, therefore, the penalty on the respondent is not imposable in the light of the decision of the Geneva Fine Punch Enclosures Ltd. 2011 (1) TMI 746 - KARNATAKA HIGH COURT wherein the Hon ble Karnataka High Court has held that the determination of liability to pay duty is a condition precedent for imposing penalty - penalty set aside - appeal dismissed - decided against Revenue.

Summary

Issues Involved:
1. Imposition of penalty under Section 11AC of the Central Excise Act, 1944 for not maintaining separate accounts of inputs used in manufacturing dutiable and exempted final products.

Analysis:
The appellate tribunal heard the appeal filed by the Revenue against the dropping of penalty by the Ld. Commissioner (Appeals) in a case where the respondent failed to maintain separate accounts for inputs used in manufacturing dutiable and exempted final products. The Revenue contended that the penalty under Section 11AC was imposable on the respondent as they did not pay the required percentage of exempted goods as per Rule 6(3) of the Cenvat Credit Rules, 2004. However, the respondent argued that since no duty was determined under Section 11A(2B) of the Act, the penalty was not applicable, citing precedents from the Hon'ble Karnataka High Court and the Tribunal in similar cases.

The tribunal carefully considered the submissions and noted that the show cause notice only sought to impose a penalty under Section 11AC without any demand for duty. Referring to the decision of the Hon'ble Karnataka High Court, the tribunal emphasized that the determination of liability to pay duty is a prerequisite for imposing a penalty under Section 11AC. The tribunal highlighted that penalty under Section 11AC can only be imposed when duty is determined under Section 11A(2). Since there was no determination of duty in the present case, the tribunal concluded that the penalty under Section 11AC could not be imposed, in line with the legal provisions and precedents cited.

In light of the above observations, the tribunal upheld the decision of the Ld. Commissioner (Appeals) to drop the penalty against the respondent. The tribunal found no fault with the impugned order and dismissed the appeal filed by the Revenue, emphasizing the importance of the legal requirements for imposing penalties under the Central Excise Act, 1944.