2018 (12) TMI 939 - HC - Central Excise

Penalty - delayed payment of duty - Held that - Gujarat High Court in case of Banian & Berry Bearing Pvt. Ltd. Vs. UOI, 2002 (8) TMI 837 - GUJARAT HIGH COURT observed that marginal delay of 2 to 10 days in making fortnightly payment on stray occasions, should not result into penal consequence. The Court had referred to Latin Maxim providing that minor lapses in law should not be visited with penalty. It is declared that the petitioner shall not have to pay any further amount of penalty - petition disposed off.

Summary

Issues:
1. Reduction of penalty under Section 11AC of the Central Excise Act, 1944 based on timely payment.
2. Interpretation of statutory provisions regarding penalty payment deadlines.
3. Consideration of unintentional oversight in penalty payment.
4. Comparison of previous court decisions on penalty payment deadlines.

Analysis:
1. The case involved a show-cause notice issued by the Excise Department to the petitioner for the recovery of duty, interest, and penalty. The penalty imposed under Section 11AC of the Central Excise Act, 1944 was ?2,28,302, with a provision that if the petitioner paid 25% of this penalty within 30 days, the remaining 75% would be waived. The petitioner deposited ?57,058 within the stipulated time but was short by ?18. Upon realizing the shortfall, the petitioner promptly paid the remaining amount. However, the Department rejected the request for reduced penalty, citing non-compliance with the 30-day deadline.

2. The High Court acknowledged the mandatory nature of the 30-day deadline for depositing 25% of the penalty amount, as established in previous rulings. Notably, the Court referenced the case of Commissioner of Central Excise, Raigad Vs. Castrol India Ltd., where the deadline was deemed mandatory. However, the distinguishing factor in this case was that the petitioner did not challenge the penalty order but complied with it, albeit with a minor oversight in payment.

3. The Court considered the petitioner's genuine intention to comply with the penalty payment requirements, emphasizing that the shortfall was due to inadvertent error and the amount involved was minimal. Recognizing the legislative intent behind penalty reduction provisions to avoid prolonged litigation, the Court deemed it unjust to burden the petitioner with the remaining 75% penalty due to a minor oversight.

4. Drawing on the Gujarat High Court's decision in the case of Banian & Berry Bearing Pvt. Ltd. Vs. UOI, the Court highlighted the principle that minor delays in payment, especially due to inadvertent errors, should not lead to penal consequences. By setting aside the impugned communications and declaring that the petitioner was not liable for any further penalty amount, the Court upheld the petitioner's claim for the benefit of reduced penalty based on the peculiar facts and unintentional oversight in payment.

In conclusion, the judgment favored the petitioner's position, emphasizing the importance of considering the specific circumstances and intentions behind penalty payments, especially in cases of inadvertent errors, to prevent undue hardship and promote fairness in penalty enforcement.