2017 (3) TMI 1285 - HC - Central Excise

Penalty - section 11AC - Whether the appellant was entitled to the benefit of payment of only 25% of the penalty? - Held that - The judgment comes to the appellant s assistance only in respect of the second proviso but not the first proviso in view of the appellant not having complied with the conditions precedent of the first proviso, namely, the payment of the duty and interest determined under section 11A(2) and Section 11AB, respectively, within 30 days of the communication of the order of the adjudicating authority. The first Proviso not having been complied with, the appellant is not entitled to the benefit of the second Proviso. Thus, the appellant is not entitled to the benefit of the reduced duty - decided against appellant. Whether an assessee is liable to pay penalty only to the extent of the balance unpaid amount of the duty determined under section 11A(2) of the Act? - Held that - the Legislature has dealt with cases of fraud, etc. differently from cases which do not involve fraud, collusion, etc. It is important, therefore, to bear in mind that the concession granted under the first proviso to section 11AC is to a person who has been guilty of fraud, collusion, etc - we are not inclined to take the view in favour of the assessee in a case under section 11AC for it involves an assessee who has been found guilty of fraud, collusion, etc - decided against assessee. Appeal dismissed - decided against assessee.

Issues Involved:
1. Entitlement to the benefit of payment of only 25% of the penalty.
2. Liability of the assessee to pay penalty only to the extent of the balance unpaid amount of the duty determined under section 11A(2) of the Central Excise Act, 1944.

Issue-wise Analysis:

Re: Question No. 1:

The primary issue was whether the appellant was entitled to the benefit of paying only 25% of the penalty. The facts reveal that the appellant's premises were searched on 04.07.2008, and the appellant paid ?5,22,759/- as duty on the same day. Subsequently, a notice was issued on 05.10.2009, demanding a total duty of ?6,00,247/-. The balance duty of ?77,498/- was deposited by the appellant on 16.09.2010, beyond the 30-day period stipulated by the adjudicating authority's order dated 02.03.2010.

Section 11AC of the Act stipulates that a penalty equal to the duty determined must be paid unless the duty and interest are paid within 30 days from the date of the communication of the order. The appellant did not comply with this requirement, and thus, the first proviso, which allows for a reduced penalty of 25%, was not applicable. The second proviso, as interpreted in the case of Commissioner of Central Excise, Rohtak vs. J.R. Fabrics (P) Ltd., was also not applicable as the appellant did not meet the conditions of the first proviso. Therefore, the appellant was not entitled to the benefit of the reduced penalty.

Re: Question No. 2:

The second issue, raised orally, questioned whether the penalty should be limited to the balance unpaid amount of the duty determined under section 11A(2). The appellant argued that the penalty should only apply to the unpaid duty of ?77,498/-.

Section 11A outlines the process for determining and recovering unpaid duties. Section 11AC mandates that the penalty is equal to the duty determined under section 11A(2). The first proviso to section 11AC offers a reduced penalty if the entire duty and interest are paid within 30 days of the communication of the order. The language of the first proviso indicates that the benefit of reduced penalty applies only if the entire duty and interest are paid within the stipulated time, not just a part of it.

The court emphasized that the concession of reduced penalty is an incentive for prompt payment of the entire duty and interest, ensuring trouble-free recovery for the Revenue. The third proviso clarifies that the duty determined by the final order (including any reductions by appellate authorities) is what counts for the purpose of section 11AC. Thus, the appellant's partial payment did not entitle them to the reduced penalty.

The court also noted that section 11AC deals with cases involving fraud, collusion, or willful mis-statement, and the Legislature has treated such cases differently from normal cases. Therefore, even if another interpretation was possible, the court was not inclined to favor the appellant, who was found guilty of fraud.

Conclusion:

Both questions were answered against the appellant. The appeal was dismissed, affirming that the appellant was not entitled to the benefit of reduced penalty and was liable to pay the penalty on the entire duty determined under section 11A(2).

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