21 STT 337 (PUNJ. & HAR.)
HIGH COURT OF PUNJAB AND HARYANA
Commissioner of Central Excise, Rohtak
J.R. Fabrics (P.) Ltd.
M.M. KUMAR AND H.S. BHALLA, JJ.
CEA NO. 5 OF 2009
APRIL 30, 2009
Section 11AC of the Central Excise Act, 1944 - Penalty - For short-levy or non-levy of duty in certain cases - Period 28-7-2001 to 28-2-2002 - Whether provisos to section 11AC postulates that if duty as determined under section 11A(2) by Central Excise Officer is paid within thirty days, then penalty equal to amount of duty is not required to be paid and amount contemplated in lieu of penalty is 25 per cent of total amount of excise duty determined by officer concerned - Held, yes - Dealer accepted its default and deposited whole amount of duty along with interest even before issue of show-cause notice i.e., prior to determination of duty and interest by Central Excise Officer - Whether Tribunal was correct in holding that dealer would pay 25 per cent of amount of duty of excise as penalty - Held, yes [Paras 12 and 13]
When officers of Central Excise visited factory of the assessee-dealer, it was detected that the assessee was clearing goods without payment of duty. The assessee accepted its default and deposited entire amount of duty along with interest even before issue of show-cause notice. However, on adjudication, the adjudicating authority imposed penalty equal to amount of duty under section 11AC. The Commissioner (Appeals) upheld the levy of the penalty. On further appeal, the Tribunal, however, held that the assessee was liable for 25 per cent of duty amount as penalty under said section.
A perusal of section 11AC shows that an amount equal to the amount of duty as determined by the Central Excise Officer under section 11A(2) is required to be paid by the assessee where any duty of excise has not been (a) levied or paid or (b) has been short-paid or (c) erroneously refunded by reason of fraud, collusion or any wilful mis-statement or suppression of facts or (d) contravention of any of the provisions of this Act or the Rules made thereunder with intent to evade payment of duty. The aforesaid principal clause has four provisos. The first two provisos postulate a concessional rate of penalty in case the amount of duty as determined under sub-section 11A(2) and the interest payable thereon under section 11AB stand paid within thirty days from the date of communication of the order of the officer determining such duty. In such a case, the amount of penalty has been stipulated to be 25 per cent of the duty so determined. [Para 7]
The second proviso further imposes an obligation that the benefits contemplated by first proviso are to be available if the amount of penalty so determined has also been paid within a period of thirty days. In other words, if the duty as determined under section 11A(2) by the Central Excise Officer is paid within thirty days, then penalty equal to the amount of duty is not required to be paid and the amount contemplated in lieu of the penalty is 25 per cent of the total amount of excise duty determined by the officer concerned. [Para 8]
It would further be necessary to notice that third proviso takes care of a situation where duty determined to be payable is reduced or increased by the Commissioner (Appeals), the Tribunal or by the High Court, then duty as reduced or increased is required to be taken into account. The provision takes care of fluctuation in the assessment of duty at the appellate stage. However, in the instant case, there was no increase or decrease in the assessment of duty of excise. The alteration had been ordered by the Tribunal in the order of the Commissioner (Appeals) by reducing the amount of penalty to 25 per cent of the total amount of duty of excise assessed by the assessing authority. Therefore, the appeal filed by the revenue was liable to be rejected. [Para 9]
The period in question was from 28-7-2001 to 28-2-2002 and there was no dispute that the proviso added by Act No. X of 2000 which was made applicable with effect from 12-5-2000 would apply which provides that an amount equal to 25 per cent of the amount of duty of excise would be liable to be paid as penalty if the amount of duty of excise is paid within thirty days from the date of communication of the order by the Central Excise Officer. [Para 10]
The order-in-original also imposed penalty which was equal to the amount of duty of excise assessed by the adjudicating authority. It was, thus, evident that acting on 2nd proviso, the amount of penalty to the extent of 25 per cent of duty could not have been deposited (by reason of the order of adjudicating authority). The order was passed by the adjudicating authority in derogation of the express provision made by the 2nd proviso and there was no opportunity for the assessee to deposit 25 per cent of the amount. Accordingly, the assessee challenged the order in appeal whereagain the demand of penalty equivalent to duty of excise was maintained. It was thereafter that an appeal was filed and the Tribunal reduced the penalty to 25 per cent of the total amount of duty of excise as assessed by the concerned officer. [Para 12]
The conclusion reached by the Tribunal was correct. However, it seemed that the reasoning followed by the Tribunal was not in accordance with the law. The amount of 25 per cent of duty imposed as penalty is not because any discretion is vested in the Court or the Tribunal but because of 1st and 2nd provisos incorporated by the Parliament (by Act No. X of 2000) with effect from 12-5-2000. Therefore, the Tribunal should not have held that since the amount of duty had been deposited before the issuance of show-cause notice, the imposition of penalty would become illegal or that lenient view was required to be taken. [Para 13]
For the reasons aforementioned, the instant appeal failed and it was dismissed. The assessee should deposit the penalty equivalent to 25 per cent of the duty of excise determined by the excise officer within 30 days from the date of receipt of a copy of instant order. [Para 16]
CASES REFERRED TO
CCE v. Malbro Appliances (P.) Ltd. 2007 (208) ELT 503 (Delhi) (para 3), Union of India v. Dharmendra Textile Processors  166 Taxman 65 (SC) (para 4) and K.P. Pouches (P.) Ltd. v. Union of India 2008 (228) ELT 31 (Delhi) (para 14).
Sanjeev Kaushik for the Appellant. Jagmohan Bansal for the Respondent.