2009 (7) TMI 318

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... ection 11AC of the Act; - No such penalty can be imposed unless one or more of the requirements laid down under Section 11AC are satisfied in a given case; - Penalty under Section 11AC of the Act cannot be avoided by mere reason of the duty having been paid prior to issue of show-cause notice; - appeal is allowed
Shri P.G. Chacko, Member (J) Shri S.A. Gundecha, Advocate, for the Appellant. Shri P.K. Agarwal, SDR, for the Respondent. [Order]. - This appeal filed by the assessee is against the penalty imposed on them under Section 11AC of the Central Excise Act. During the period of dispute (April 2003), the appellant had not paid duty on their final product. During this period, they availed themselves of SSI benefit under Notification 8/2003-C.E. Officers of the department who visited their factory and gathered evidence with regard to duty liability, found that the appellant was not eligible for SSI benefit for the above period as their aggregate value of clearances in the previous year exceeded Rs.300 lakhs which was the maximum limit prescribed under the above notification for a small scale industrial unit to claim the benefit of exemption from payment of duty in the succeed .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... on of duty under sub-section (2) of Section 11A of the Act. According to the learned counsel, in the instant case, there was no such determination of duty by the proper officer of Central Excise inasmuch as the assessee themselves ascertained the duty amount and paid the same under sub-section (2B) of Section 11A of the Act before issuance of the show-cause notice. In this context, the learned counsel has emphasized the interpretation given by the Supreme Court, in para 23 of its judgment in Rajasthan Spinning & Weaving Mills case, to the earlier judgment of the Court in UOI v. Dharmendra Textile Processors - 2008 (231) E.L.T. 3 (S.C.). The counsel has also relied on the Tribunal's decision in Dhillon Kool Drinks Beverages v. CCE, New Delhi - 2000 (120) E.L.T. 81 (Tribunal) and Eicher Demm v. CCE, Chandigarh - 2002 (140) E.L.T. 227 (Tri.-Del.), in both of which it had been held that, in the absence of determination of duty under Section 11A(2), no penalty could be imposed under Section 11AC. 3. Interestingly, the learned SDR has also relied on Rajasthan Spinning & Weaving Mills case (supra). He has laid stress on the view expressed by the Apex Court in para 2 of its judgment, whic .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... al to duty determined under sub-section (2) of Section 11A. This view expressed by the Supreme Court in the context of clarifying its earlier judgment in Dharamendra Textile Processors case can be had from para 23 of the judgment in Rajasthan Spinning & Weaving Mills case. The ratio of the judgment in Rajasthan Spinning & Weaving Mills case can also be gathered from certain other parts of the text of the judgment, one of which is para 2. The view expressed by the apex court in para 2 of its judgment in Rajasthan Spinning & Weaving Mills case has already been reproduced in an earlier part of this order. This view was also expressed in the context of interpreting the earlier judgment in Dharamendra Textile Processors case. Therefore, one has got to get at the cumulative effect of the view expressed by the Apex Court in paragraphs 2 and 23 of its judgment in Rajasthan Spinning & Weaving Mills case. In other words, a combined reading is imperative. Proceeding on this basis, I find that the following points can be deduced from the Apex Court's judgment in Rajasthan Spinning & Weaving Mills case:- (a) A determination of duty by the proper officer of Central Excise under sub section (2) .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X

..... th of April 2003. This proposal made in the show-cause notice was in breach of the injunction contained in sub­section (2B) of Section 11A. Had there been any short-payment of duty even after the payment made by the appellant in January 2004, the department would have been justified in issuing the show-cause notice in respect of the duty short-paid. This situation certainly was not obtaining in this case. Therefore, the requirement under Section 11AC of an amount of duty having to be determined under sub-section (2) of Section 11A was not satisfied in this case. Where this essential requirement was not satisfied, allegation of suppression, contravention of rules with intent to evade payment of duty etc. would turn out to be irrelevant. Thus, in the instant case, Section 11AC of the Central Excise Act was erroneously invoked against the appellant. In this scenario, the penalty on the appellant has to be set aside. 6. The arguments of the learned SDR have been, by and large, centered around sub-section (2B) as this provision existed after its amendment dated 14-5-2003. The amended provision contains the phrase "on the basis of his own ascertainment of such duty", which phrase di .....

X X   X X   Extracts   X X   X X

→ Full Text of the Document

X X   X X   Extracts   X X   X X