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TMI Blog2012 (6) TMI 697X X X X Extracts X X X X X X X X Extracts X X X X ..... C is intended to encourage payment of tax due to the revenue at the earliest without resorting to unwarranted litigation and it is not an incentive for violating the provisions of law. Therefore, benefit of paying lesser penalty cannot be extended to the assessee - Decided in favor of Revenue. - Central Excise Appeal No. 22 OF 2012 - - - Dated:- 25-6-2012 - J P Devadhar And M S Sanklecha, JJ. For Appellant : Mr. Pradeep S. Jetly with J B Mishra For Respondent : Mr. Anupam Dighe with Avikshit Moral, Arjun Shrivastav, Adv Mr. M H Patil, Amicus Curiae JUDGEMENT Per : J P Devadhar, J : 1) This appeal filed under Section 35G of the Central Excise Act, 1944 ['1944 Act' for short] was admitted on 8th February, 2012 on two substantial questions of law. However, at the hearing of the appeal, the aforesaid substantial questions of law have been by consent reframed into one substantial question of law as follows:- Whether the CESTAT was justified in directing the assessee to pay 25% of the penalty levied under Section 11AC within 30 days from the date of communication of the order passed by the Tribunal, when the first and second proviso to Section 11AC specifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed under Section 11 AC of the 1944 Act and Rules 57AH(2) of the 1944 Rules. 7) After the issuance of the show cause notice dated 8th January, 2003, the assessee on 31st March, 2003 paid interest amounting to Rs.8,24,364/- on the excess credit availed by the assessee. Thereafter, in its reply to the show cause notice, the assessee contended that the excess credit was taken through oversight and due to the clerical error / punching error and that as soon as the error was pointed out, the excess credit has been reversed even before the issuance of the show cause notice and, therefore, the question of appropriating the credit reversed as duty or imposing penalty under Section 11AC of the 1944 Act does not arise. 8) Rejecting the contention of the assessee, the Commissioner of Central Excise, passed an Order in Original on 12th November, 2003 under Section 11A(2) of the 1944 Act holding that the excess credit of Rs.28,12,173/- was taken with an intention to evade payment of duty and, therefore, the credit of Rs.28,12,173/- reversed by the assessee was liable to be appropriated against the credit denied and interest of Rs.8,24,364/- paid by the assessee was liable to be appropriated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the date of communication of the order passed by the Central Excise Officer and, therefore, the assessee is liable to pay penalty at 100%. 11) Relying on a decision of this Court in the case of The Commissioner of Central Excise V/s. M/s. Viraj Alloys Ltd. (Central Excise Appeal No.64 of 2005) decided on 13th October, 2010, counsel for the revenue submitted that if the demand confirmed under Section 11A(2) with interest and penalty at 25% of the total penalty imposed is not paid within 30 days from the date of receipt of the Order in Original, then, the benefit of reduced penalty under the first proviso to Section 11AC would not be available to the assessee. Where the assessee fails to pay 25% of the penalty imposed under Section 11AC along with duty and interest within 30 days of communicating the order determining the duty, it is not open to the CESTAT to enlarge the scope of Section 11AC and direct the assessee to pay 25% of the penalty within 30 days from the date of communication of the order passed by the CESTAT. Accordingly, the counsel for the revenue submitted that the order of CESTAT which is contrary to the provisions contained in Section 11AC of the 1944 Act mus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11A(2B) of the 1944 Act within 30 days; (c) Although said sub-sections (2B) (2C) of Section 11A were applicable to cases not involving fraud, collusion, suppression of facts, etc. a provision has been made for payment of duty along with interest, without levying penalty, even after detection by the Central Excise Officers; (d) payment of duty (entire amount or part of the admitted amount) along with interest, and 25% penalty within 30 days from the receipt of show cause notice was brought into effect from 13/7/2006 which substantiates the intention of Government not to levy 100% penalty but levy 25% penalty." 14) Regarding the scope of the first and the second proviso to Section 11AC, it is stated in the written submissions filed on behalf of the assessee as follows:- the first proviso gives a concession in payment of 100% penalty, which is determined under Section 11AC, if the noticee pays the duty as determined and interest thereon within 30 days of communication of the order. The said proviso reduces the penalty to 25%. The second proviso inter alia requires the noticee to pay the amount of penalty so determined within a period of 30 days to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of Central Excise V/s. Bhagyoday Silk Industries reported in (2010) 262 ELT 248 (Guj) and also other decisions of Punjab Haryana High Court and Gujarat High Court wherein similar view has been taken. 16) We have carefully considered the rival submissions. 17) Before dealing with the merits of the rival submissions, it would be appropriate to quote Section 11AC as originally introduced as well as Section 11AC as amended from time to time. Section 11AC as inserted by the Finance (No.2) Act 1996 with effect from 28 th September, 1996 11AC 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 the duty determined to be payable is reduced or increased ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his section shall also apply to cases in which the order determining the duty under sub-section (2) of section 11A relates to notices issued prior to the date on which the Finance Act, 2000 receives the assent of the President. (2) any amount paid to the credit of the Central Government prior to the date of communication of the order referred to in the first proviso or the fourth proviso shall be adjusted against the total amount due from such person." Section 11AC as substituted by Finance Act, 2011 with effect from 8 th April, 2011. Section 11AC Penalty for short-levy or non-levy of duty in certain cases (1) The amount of penalty for non-levy or short levy or non payment or short payment or erroneous refund shall be as follows :- (a) where any duty of excise has not been levied or paid or short-levied or short-paid or erroneously refunded, by reason of fraud or 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 (10) of section 11A shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passed by the adjudicating authority on 12th November, 2003 and hence we are required to construe the provisions of Section 11AC as it stood on 12th November, 2003 i.e. prior to the substitution of Section 11AC by Finance Act, 2011. 19) Section 11AC as amended by Finance Act, 2000 with effect from 12th May, 2000, which is applicable to the facts of the present case, inter alia provides that where a person contravenes any of the provisions of the 1944 Act or the rules made thereunder with an intention to evade payment of duty, then, such person who is liable to pay duty determined under Section 11A(2) shall also be liable to pay a penalty equal to the duty so determined. The question as to whether the penalty leviable under Section 11AC is mandatory or discretionary has been considered by the Apex Court in the case of Union of India V/s. Dharmendra Textile Processors reported in 231 ELT 3 (SC) as also in the case of Union of India V/s. Rajasthan Spg. Wg Mills reported in 238 ELT 3 (SC) . The dictum laid down by the Apex Court in the aforesaid cases is that once it is held that Section 11AC is attracted, then, the concerned authority would not have any discretion and penalt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 11A(2), then, the assessee is not required to pay the balance penalty of 75%. 22) Thus, the legislature while mandatorily imposing penalty under Section 11AC equal to 100% of the duty determined under Section 11A(2), provides an incentive to the assessee covered under Section 11AC by providing that if the duty determined under Section 11A(2) together with interest payable under Section 11AB is paid within the stipulated time, then, the penalty payable would be 25% determined, subject to the condition that 25% of the penalty is also paid within the time stipulated therein. Section 11AC neither requires the Central Excise Officer to determine the quantum of 25% penalty nor does it require the Central Excise Officer to communicate the availability of the option under Section 11AC. Once the duty is determined under Section 11A(2) and 100% penalty is imposed under Section 11AC, it is for the assessee to avail the incentive by paying the duty, interest and 25% of the penalty within the time stipulated under the section. If the assessee fails to fulfill the conditions set out in the first and the second proviso to Section 11AC within the time stipulated therein, then, the incenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he conditions set out in the proviso to Section 11AC, the benefit of paying lesser penalty cannot be extended to the assessee. 25) If the contention of the assessee that even the appellate authority can direct the assessee covered under Section 11AC to pay 25% of the penalty within thirty days from the date of communication of the order passed by the appellate authority is accepted, then it would defeat the very object with which the incentive under Section 11AC is allowed. The basic object of granting incentive under Section 11AC is to encourage payment of duty sought to be evaded with interest and penalty at 25% within the time stipulated therein. When the legislature specifically fixes the time limit within which the duty with interest and penalty at 25% is to be paid for availing the incentive, it would neither be open to the appellate authority nor any other authority to permit the assessee to pay 25% penalty at any time other than the time prescribed under Section 11AC. 26) By comparing Section 11AB with Section 11A(2B) and (2C) and also by referring to Section 11AC as substituted with effect from 8th April, 2011, it was contended by the counsel for the assessee that it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rst and the second proviso to Section 11AC is required to be paid within thirty days from the date of communication of the order the Central Excise Officer determining duty under Section 11A(2), it would not be open to the appellate authority or the Court to direct the assessee to pay 25% penalty beyond the date stipulated in the first and the second proviso to Section 11AC. For all the aforesaid reasons, we find it difficult to endorse the contrary views expressed by the Delhi High Court, P H High Court and the Gujarat High Court in the cases referred to by the counsel for the assessee. 28) In the present case, the applicability of Section 11AC is not in dispute. It is also not in dispute that the assessee has paid the duty sought to be evaded as also the interest payable thereon under Section 11AB before the passing of the adjudication order. Admittedly, the assessee has not paid 25% of the penalty imposed under Section 11AC within thirty days from the date of the communication of the order of Central Excise Officer determining the duty sought to be evaded under Section 11A(2) of the Act which is the mandatory requirement under Section 11AC. Instead of paying 25% of the penal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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