Mandatory Penalty under Section 11AC of CEA, 1944- Reduction to 25%

PJ/Case Laws/2011-12/1252

Case: The Commissioner of Central Excise, Ahmedabad-I Vs Akash Fashion Prints Pvt. Ltd.

Citation: 2009-TIOL-125-HC-AHM-CX

Issue:-Whether the Tribunal is justified in reducing the mandatory penalty levied under Section 11AC of the Central Excise Act despite confirmation of demand of duty on finding of clandestine removal not being contested on the ground that duty was deposited much before the issuance of the show-cause notice?

Brief facts: -Respondent-assessee carried the matter in appeal but did not succeed. Hence, second appeal was preferred before the Tribunal. The Tribunal has reduced the penalty.

When the attention of the respondent was invited to the order made by the Adjudicating Authority and the fact that the Tribunal had reduced the penalty to 25% of the penalty imposed, the respondent once again reiterated request for adjournment.

Reasoning of the Judgment:-Section 11AC of the Act provides for levy of penalty in cases of short-levy or non-levy of duty in certain cases. The first proviso there under provides for exception to the main provision by stipulating that where the duty and the interest are 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 under Section 11AC of the Act shall be 25% of the duty so determined; and under second proviso, it is provided that the benefit of reduced penalty under the first proviso shall be available if the amount of penalty so determined has also been paid within a period of thirty days referred to in the first proviso.

In the facts of the present case, the duty was paid on 07.01.2002, as recorded by the Tribunal, whereas the duty amount was fixed by the Adjudicating Authority on 24.02.2004. Therefore, admittedly, the amount which was paid prior to the raising of demand has to be considered as having been in compliance with the first proviso.

Accordingly, the equivalent penalty under Section 11AC of the Act shall stand reduced to 25% if the assessee complies with requirement of second proviso to Section 11AC of the Act. It is in this context that the Tribunal has reduced the penalty amount.

In the circumstances, it is not possible to accept the submission on behalf of the appellant that the penalty ought not to have been reduced.

Decision:-Appeal dismissed.

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PJ/Case Laws/2011-12/1252

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