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TMI Blog2009 (5) TMI 686X X X X Extracts X X X X X X X X Extracts X X X X ..... y availed the facility of Modvat credit under erstwhile Rule 57-A and 57-Q of the Central Excise Rules, 1944. The appellant issued show cause notice to the respondents on 3-5-2000 requiring them to show cause as to why the duty to the tune of Rs. 14,80,597.50, short paid on the inputs cleared under Rule 57F(2) and 57F(3) should not be demanded and recovered under Rule 57-I and 9(2) of the said Rules read with Section 11-A of the said Act and short paid duty, already debited, should not be appropriated and penalty should not be imposed under Rule 9(2), 57(1) and 173-Q of the said Rules. After hearing the respondents, the Deputy Commissioner, Gurgaon, by order dated 16-6-2000 imposed penalty, as stated above, along with confirming the demand for short paid duty to the tune of Rs. 14,80,597.50. The matter was carried in appeal by the respondents, whereupon the Commissioner (Appeals), relying upon the decision of this Tribunal in the case of CCE, Delhi-III (Gurgaon) v. Machino Montell (I) Ltd., reported in 2004 (168) E.L.T. 466 (Tribunal) = 2004 (62) RLT 709 (CESTAT-LB), held that no penalty could have been imposed under Section 11-AC and no interest could have been demanded under Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relation to the penalty for short levy or short payment is clearly provided under Section 11-AC of the said Act. It reads thus : "11-AC. Penalty for short-levy or non-levy of duty in certain cases. - Where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reasons of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, the person who is liable to pay duty as determined under sub-section (2) of Section 11A, shall also be liable to pay a penalty equal to the duty so determined : Provided that where such duty as determined under sub-section (2) of Section 11A, and the interest payable thereon under Section 11AB, is paid within thirty days from the date of communication of the order of the Central Excise Officer determining such duty, the amount of penalty liable to be paid by such person under this section shall be twenty-five per cent, of the duty so determined : Provided further that the benefit of reduced penalty under the first proviso shall be available if the amount of penalt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions contained in sub-section (2), or sub-section (2B), of Section 11A till the date of payment of such duty : Provided that in such cases where the duty becomes payable consequent to issue of an order, instruction or direction by the Board under Section 37B, and such amount of duty payable is voluntarily paid in full, without reserving any right to appeal against such payment at any subsequent stage, within forty-five days from the date of issue of such order, instruction or direction, as the case may be, no interest shall be payable and in other cases the interest shall be payable on the whole of the amount, including the amount already paid. (2) The provisions of sub-section (1) shall not apply to cases where the duty had become payable or ought to have been paid before the date on which the Finance Bill, 2001 receives the assent of the President. Explanation 1. - Where the duty determined to be payable is reduced by the Commissioner (Appeals), the Appellate Tribunal [National Tax Tribunal] or, as the case may be, the court, the interest shall be payable on such reduced amount of duty. Explanation 2. - Where the duty determined to be payable is increased or further inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igatory function on the part of the concerned authority to ensure imposition and recovery of such penalty according to the provisions of law. 10. The Apex Court in the case of Zunjarrao Bhikaji Nagarkar v. Union of India (supra), while dealing with the issue regarding the obligation under Rule 173-Q of the Central Excise Rules, 1944 held that : "In both Rule 173Q and Section 11AC the language is somewhat similar. Under Rule 173Q 'such goods shall be liable to confiscation' and the person concerned 'shall be liable to penalty' not exceeding three times the value of excisable goods or five thousand rupees whichever is greater. Under Section 11AC the person, who is liable to pay duty on the excisable goods as determined 'shall also be liable to pay penalty equal to the duty so determined'. What is the significance of the word 'liable' used both in Rule 173Q and Section 11AC? Under Rule 173Q apart from confiscation of the goods the person concerned is liable to penalty. Under Section 11AC the word 'also' has been used but that does not appear to be quite material in interpreting the word 'liable' and if liability to pay penalty has to be fixed by the adjudicating authority...... ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s product-"pulsator" without adding the value of "bushes", which were supplied to it, and was paying duty only on the "pulsators" manufactured by it. It has come on record that Shri H.D. Sharma, Assistant Manager (Excise and Stores) of the respondent-assessee, who was fully conversant with the affairs of the assessee, has categorically admitted that the assessee was clearing pulsators without adding the value of bushes, which were fitted in the pulsators. He also admitted that they were following this procedure of clearing pulsators without adding the value of bushes, which were fitted in them and became their integral part, since 1997-2001, and that the assessee had not disclosed that fact to the department under an impression that it had received bushes for job work and was, accordingly doing the job work. Shri Sharma also admitted the fact of having paid less Central Excise duty than what was actually due to be paid. He also admitted that the assessee was not doing any job work on the bushes, which were supplied to it, but was instead manufacturing a new product by using bushes as input. According to him, the bushes, which were supplied to them were priced at Rs. 3.15 without ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the question of penalty under Section 11AC. We, therefore, hold that on the established facts of the present case, the imposition of penalty under Section 11AC of the Act is clearly warranted. 15. Once it is held that imposition of penalty under Section 11AC Act is warranted, the wordings of Section 11AC do not leave any option for imposing a reduced penalty, except as specifically provided for in the amended provisions of Section 11AC. Under the first proviso to the amended provisions of Section 11AC, it is only when the duty is paid, along with interest and penalty as determined, within thirty days, that the person concern will be entitled to the benefit of paying penalty at the rate of 25% of the duty determined. In other words, penalty equal to the duty determined has to be ordered and only if after making of such order the duty determined is paid along with interest and penalty at 25% of the duty determined within thirty days, that the relaxation from the stringent penalty equal to the duty determined as ordered can be availed. The benefit of reduced penalty of 25% of the duty determined, in the shape of a reduced liability to pay penalty is dependent upon the continge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tobacco's case (supra) had held that imposition of penalty has nothing to with the timing of show cause notice. 16. Similarly, in case of payment of interest, the expression used is "..........shall, in addition to duty, be liable to pay interest at such rate......". This also discloses the obligation of the authority as well as that of the assessee to demand and to pay respectively the interest on the short levy or non-levy of duty amount. 17. Reverting to the facts of the case, it is seen that the Deputy Commissioner by its order had held that the respondent had cleared the modvat availed inputs by short payment of duty of Rs. 14,80,597.50 in contravention of provisions of law and therefore in terms of Rules 57F(3), G(1) of Central Excise Rules, 1944 read with Section 11-A of the Central Excise Rules, 1944 the penalty is inescapable. In appeal by the respondent against the said order, there was challenge to the imposition of the said penalty on the ground that the short payment of duty was not with intent to evade duty and in any case the short levy was made good before issuance of the show cause notice. 18. The Commissioner (Appeals) in the impugned order by m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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