2019 (11) TMI 672 - HC - Central Excise

Levy of penalty - Whether learned Commissioner, in the facts and circumstances of the case, was right in exercising his discretion, which otherwise is not contemplated, for not imposing penalty as stipulated under section 11AC of the Central Excise Act despite he has held liability under section 11A of the Act? - reasons for upholding the order of the learned Commissioner not assigned - Principles of natural justice. HELD THAT - On a plain reading of the provisions of section 11AC of the Act, it is evident that the condition precedent for invoking the said provision is that there should be fraud, collusion or any mis-statement or suppression of facts or contravention of any of the provisions of the Act or the rules made thereunder with intent to evade payment of duty - In the facts of the present case, in the light of the concurrent findings of fact recorded by the adjudicating authority the condition precedent for invoking the provisions of section 11AC of the Act is not satisfied. Appeal dismissed.

Summary

Issues:
Challenge to order under section 35G of the Central Excise Act, 1944 regarding imposition of penalty under section 11AC and reasons for upholding the order by the Tribunal.

Analysis:
The appellant challenged an order passed by the Customs, Excise and Service Tax Appellate Tribunal under section 35G of the Central Excise Act, 1944. The appellant raised two substantial questions of law regarding the imposition of penalty under section 11AC despite liability under section 11A and the lack of cogent reasons by the Tribunal for upholding the Commissioner's order. The respondent, a 100% EOU, cleared goods to the domestic tariff area after cancellation of an order, leading to a demand and penalty imposition. The Tribunal upheld the penalty, prompting the appellant's appeal.

The appellant argued that the Tribunal erred in not imposing the mandatory penalty under section 11AC on the respondent for failing to produce required certificates and not informing the department about the diversion of goods. The appellant contended that the respondent's actions constituted suppression of facts, justifying penalty under section 11AC. However, the adjudicating authority found no fraud, collusion, or intent to evade duty, leading to penalty imposition under rule 25 of the Central Excise Rules, 2002.

The Tribunal concurred with the adjudicating authority's findings, upholding the penalty under rule 25. The adjudicating authority's decision was based on the absence of fraud, collusion, or suppression of facts by the respondent to evade duty, a prerequisite for invoking section 11AC. As per the Act, section 11AC requires the presence of fraud, collusion, misstatement, or suppression of facts to apply. Since these conditions were not met in this case, the Tribunal's decision was deemed legally sound, with no substantial question of law arising for consideration.

Ultimately, the appeal was dismissed summarily as the conditions for invoking section 11AC were not met, and the Tribunal's decision was upheld.