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Corporate News *  Service tax penalty can’t survive when assessee acted on dept.’s own view of non-taxability: Delhi High Court. *  GST section 74 extended limitation questionable when form 26AS mismatch was already known: Karnataka High Court grants interim relief. *  CGST demand prima facie impermissible after state GST settlement under section 128A: Bombay High Court. *  Supreme Court asks GSTAT to sympathetically consider delay as taxpayers pursued remedy before wrong forum. *  Supreme Court stays Tripura High Court ruling protecting genuine buyers from ITC denial over supplier’s GST default. *  Diary entries alone can’t prove clandestine removal of goods: CESTAT quashes excise penalty on steel trader. *  Customs could investigate preferential tariff claims even before sec. 28DA: Delhi High Court. *  Customs dept. relied on fake AI generated case laws: supreme court quashes Rs. 425.28 crore penalty. *  No GST exemption in affiliation and annual registration charges for admission or conduct Of examinations: GSTAT. *  Mere invoices, cheque payments insufficient to establish genuine movement of goods: GSTAT restores Rs. 43.44 lakh ITC demand. *  Consolidated GST show cause notice covering multiple financial years is not without jurisdiction: Delhi High Court. *  Construction of independent houses on separate plots not taxable as ‘Residential Complex’ without common facilities: CESTAT. *  GST penalty exceeding statutory maximum unsustainable; Allahabad High Court quashes ? 50,000/- penalty after taxpayer filed return and paid late fee. *  GST order against standard chartered bank passed without hearing set aside by Bombay High Court. *  Retracted statements can’t be relied upon without cross-examination: CESTAT quashes gold confiscation. *  Burden to prove misclassification lies on customs department: CESTAT. *  CESTAT quashes Rs. 98 lakh excise demand on clearance of used refractory brick scrap. *  Service tax demand on irrigation works quashed: Karnataka High Court rules sale of goods component not taxable as service. *  GSTAT restores tax and penalty for transporting iron scrap without E-way bill citing intent to evade tax. *  Madras High Court stays GST recovery from directors without opportunity to show cause under section 89. *  Madras high court stays GST recovery notice against directors; finds prima facie case on applicability of section 79(1)(c). *  Procedural lapses can’t justify harsh punishment without serious customs breach: CESTAT quashes customs broker licence revocation. *  Service tax payable on land leasing and sports complex charges: CESTAT. *  Settled customs dispute can’t be reopened through Article 226 challenge to interest liability: Delhi High Court. *  Mere facilitation of customs clearance can’t establish knowledge of smuggling: Madras High Court. *  GST registration cancellation stayed: Allahabad High Court questions 99% ITC utilisation cap under rule 86B. *  Composition scheme lapses automatically on crossing Rs. 1.5 crore turnover: GSTAT. *  Gujarat High Court quashes GST cancellation orders after officer relied on non-existent AI-generated case laws. *  Importers liable for customs duty benefits availed through manipulated scrips: Delhi High Court. *  Procedural E-way bill lapse alone can’t justify penalty where genuine transaction and absence of tax evasion are established: GSTAT.
Subject News *  Documentary evidence dominates probe, further custody unwarranted: mumbai court grants bail in Rs. 22.44 crore customs duty evasion case. *  Business premises can’t remain sealed for non-participation in GST search: Allahabad High Court. *  GST pre-deposit must be refunded proportionately when taxpayer partly succeeds in appeal: Bombay High Court. *  Supreme Court grants 30 days to file GST appeal; keeps pre-deposit issue open due to deposit in parallel CGST proceedings. *  GST demand can’t exceed amount proposed in SCN: Allahabad High Court quashes Rs. 20.47 Crore order. *  Hundreds-of-crores GST demand and heavy 10% pre-deposit no ground to bypass statutory appeal: Punjab & Haryana High Court. *  Delhi High Court refuses to entertain challenge to gold confiscation due to statutory appeal remedy and unexplained delay. *  Procedural error in customs broker licence inquiry can be rectified through remand: Delhi High Court. *  GSTR-2A mismatch alone can’t justify ITC denial without invoice-wise verification; personal hearing mandatory: GSTAT. *  GST order passed without uploading personal hearing notices violates sec. 75(4): Allahabad High Court. *  TAX EVASION - Sec. 74 GST SCN quashed for not spelling out fraud, wilful misstatement or suppression: Allahabad High Court. *  STPI’s SOFTEX certification and NoC charges taxable as business support services: CESTAT. *  Suspicion can’t replace proof: CESTAT quashes penalty in alleged gold-smuggling operation. *   Limitation runs from communication of order: Madras High Court upholds rejection of delayed GST Appeals. *  Rajasthan High Court quashes GST demand over unsigned show cause notice. *  ITC recovery upheld where supplier failed to deposit GST: Rajasthan High Court. *  Customs commissioner’s empowered to make port trust liable for duty on pilfered goods: Supreme Court. *  Rectification proceedings can’t be used to challenge an uncontested GST assessment through a writ petition: Andhra Pradesh HC. *  GST proceedings against deceased proprietor unsustainable without notice to legal heir: GSTAT. *  Mere availment of ineligible self-assessed ITC doesn’t amount to suppression without evidence of fraud or wilful misstatement: GSTAT. *  Disposal of mining overburden by entity authorised by mining lease holder constitutes taxable service: CESTAT. *  Toll plaza data not mandatory for ITC refund: GSTAT. *  Disputed GST fraud allegations require investigation: Punjab and Haryana High Court makes interim bail absolute in alleged fraud and GST fraud case. *  Non-manufacturer contractor liable to deposit excess excise duty collected from buyer: CESTAT. *  GST order can’t reject taxpayer’s reply as “not satisfactory” without reasons: Madhya Pradesh High Court. *  Uncorroborated statements can’t establish alleged diversion of duty-free goods: CESTAT. *  Erection services were not liable to service tax prior to 10th september 2004: CESTAT. *  Sec. 74 GST notice must spell out statutory ingredients for invoking extended tax demand proceedings: Allahabad High Court. *  No jurisdictional bar under section 6(2)(b) in parallel CGST SGST proceedings: Delhi High Court refuses to bypass GST appeal remedy. *  Madras High Court remits GST demand for fresh adjudication after taxpayer claims it was unaware of SCN following business closure.  

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PJ/Case Laws/2010-11/1056

Penalty under Section 11AC of CEA, 1944

Case:-Geneva Fine Punch Enclosures Ltd v/s CCE, Bangalore
 
Citation:-2010 (102) RLTONLINE 366 (CESTAT-BAN.)
 
Issue:- Whether penalty under Section 11AC can be imposed when duty liability is not determined under Section 11A (2)?
 
Brief Fact:- Department in their investigation found that the appellant-assessee is liable to pay an amount of Rs 2, 61,028 along with interest due to some procedural irregularities during the period from July 2001 to November 2003. Appellant paid the amount with interest and intimated this fact to investigating officers before the show cause notice was issued. 

Department issued show cause notice proposing to impose penalty under Section 11AC. The assessee contested the show cause notice before the adjudicating authority.  The Adjudicating Authority relying upon the various decisions of the Tribunal and as upheld by the Supreme Court came to the conclusion that the appellant having paid the duty liability before the issuance of show cause notice, no penalty need be imposed under Section 11AC.
 
Revenue preferred an appeal. The Commissioner (Appeals) allowed their appeal and passed the order that appellant was liable penalty equivalent to duty. It was also held that the appellant can also exercise the option of reduced penalty of 25%, as provided under proviso to Section 11AC, by paying the penalty within 30 days from the date of receipt of this order. 

Appellant has filed this appeal against impugned order.
 
Appellant’s Contentions:- Appellant referred to the provisions of Section 11AC and 11A. It was submitted that the show cause notice and order-in-original has nowhere confirmed the demand under provisions of Section 11A (2) of Central Excise Act 1944.  The imposition of penalty under Section 11AC mandates a requirement of confirmation of duty under provisions of Section 11A (2). Reliance was placed on the judgment given in UOI v/s Rajasthan Spinning and Weaving Mills [2009 (238) ELT 3 (SC)].
 
Respondent contention:- Revenue contended that the show cause notice illustrates the examples wherein the appellant has not discharged the duty liability on the goods which were cleared from the factory premises on delivery challans and also on raw materials on which cenvat credit was taken without payment of duty.  It is submitted that the show cause notice clearly records the existence of debit notes wherein the development charges were charged to the customer which formed part of the assessable value and on which no excise duty was discharged.  The entire show cause notice proceeds and lays down the ingredients of the Section 11A (2).  Hence penalty imposed by the Commissioner under Section 11AC is sustainable.
 
Reasoning of Judgment:- The Tribunal held that the provisions of Section 11AC clearly specify that penalty for short-levy and non-levy under Section 11AC can be imposed only when the liability to pay duty is determined under provisions of Sub-section (2) of Section 11A.
 
The Tribunal held that the show cause notice does not demand duty or there is any direction to the assessee for determination of duty under Sub-section (2) of Section 11A.  In the absence of such determination of duty under sub-section (2) of Section 11A, penalty under Section 11AC cannot be imposed.  

Reliance was placed on the judgment given in the case of Rajasthan Spinning and Weaving Mills wherein it was held that the penalty provision of Section 11AC would come into play only after an order is passed under Section 11A (2) with the finding that the escaped duty was the result of deception by the assessee by adopting a means as indicated in Section 11AC. 
 
Accordingly, the Tribunal held that in appellant’s case there was no determination of duty liability under the provisions of Section 11A (2) of the Central Excise Act, the impugned order to the extent it imposes equivalent amount of penalty under Section 11AC is not sustainable.  Impugned order is set aside.                                      
Decision:- Appeal Allowed.
 
Comment:- Earlier it was held in number of cases that the duty is deposited before issue of show cause notice then no penalty under Section 11AC will be imposed. But the Apex Court has held in case of Dharmendra Textile that the penalty is imposable irrespective of the fact that duty is deposited before or after the issue of show cause notice. Thereafter, it was also decided that the allegation of willful suppression, fraud, collusion is necessary for invoking penalty under Section 11AC. Further, it was held that the option to pay 25% penalty along with duty and interest within 30 days is available even at appellate stage. The Delhi High Court said that the option should be given at adjudication stage that the duty, interest is paid along 25% penalty within 30 days then rest of penalty under Section 11AC will be waived. But if this option is not given earlier then it can be given at appellate stage. Now with this new analogy that if the demand is not confirmed under Section 11A(2) then the penalty cannot be imposed under Section 11AC will have far reaching effect. Further, this is not a final decision and the department will challenge it in Courts also. Let us wait and watch. But the appellant will have one more ground to plead before the Authorities. 

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