Chartered Accountant
Bookmark and Share
click here to subscribe our newsletter
 
 
Corporate News *  The GSTN has issued an Advisory dated 21.04.2026 about the introduction of an Offline Tool for the Invoice Management System (IMS)  *  CBIC extends due dates for filing of FORM GSTR 3B  for the month of April 2026 *  Interest cannot be imposed in adjudication order, if not demanded/quantified in show cause notice : Allahabad HC *  Wheelchairs with toileting facility eligible for exemption: CESTAT affirms customs duty exemption to importer *  Industries urge GST council to allow inverted duty refunds on input services *  Tamil Nadu GST dept introduced virtual hearing facility for GST appeals under under section 107 of the TNGST act: detailed guidelines  *  CIC urges authorities to implement GST evasion complaint tracking system *  Even if the assessee opts "NO" for personal hearing in form DRC-06 ,The mandatory requirement under section 75(4) to grant opportunity of hearing cannot be waived:Gujarat High Court  *  Glufosinate imports curbs imposed by govt *  Government extends Re-import period for exported cut & polished diamonds *  CIC flags lack of tracking system for tax evasion complaints,urges GST authorities to improve transparency *  No Custodial Interrogation needed in GST fraud case based on documentary evidence already in Department's Possession : Chattisgarh HC *  Orders under section cannot be sustained if passed without considering the taxpayer's objections and without granting a personal hearing:Gujarat High Court *  Mere cancellation of supplier's registration cannot,by itself,justify denial of ITC or cancellation of the recipient's registration:Bombay High Court *  High Court sets aside GST notice citing factual errors and natural justice violations *  Provisional Bank Attachment under Section. 110 of Customs Act Unsustainable Beyond Statutory period without Extension order: Bombay HC orders to defreeze accounts *  Post Clearance MRP Alteration by Distributor Does not attract Differential Customs Duty: CESTAT *  DGFT Expands scope of 'Screws' classification under RoDTEP Scheme  *  E-way bills surze to all time high of 140.6 million in March *  GST Exemption Allowed on Pure Labour Services for Standalone Houses: AAR  *  GST Payable Only on Margin in Second-Hand Car Sales, Subject to Strict Conditions and No ITC Claim: AAR *  DGFT rolls out procedure for allocation of calcined coke *  GST portal update : Pre-deposit amount now editable in Appeals *  J&K HC declared TMT scrap a 'Specified Good' eligibile for GST refunds under Support Scheme  *  Pigmy agents are employees of banks; no GST can be levied on commission  paid to them : Karnataka HC *  DGFT Revises HS Code Description for Screws Under RoDTEP *  GST Registration Cancellation Invalid Without Proper Service of Notice: Allahabad High Court. *  Bengaluru CGST | GST Backlog Appeals Deadline Fixed at June 30, 2026 *  No Time Bar on Refund of Service Tax for Services Not Rendered: CESTAT  Remands Indiabulls Case for Unjust Enrichment Check. *  Supreme Court Holds Renewable Energy Incentive Must Benefit Generators, Not Be Adjusted in Tariff
Subject News *   Delhi HC Quashes Order, Says Reminder Cannot Validate Improperly Served GST SCN *  KARNATAKA HIGH COURT REMANDS GST SHORTFALL MATTER DUE TO ABSENCE OF PERSONAL HEARING   *  CESTAT cancels confiscation and penalties on imported computer cabinet cases: Custom duty restricted to 111 surplus units *  Deposit of tax during search or investigation cannot be treated as 'Voluntary Payment' : Bombay High Court *  Section 76 of the CGST cannot be invoked where the tax has already been duly deposited, even if through another registration of the same entity: Madras High Court *  Sec 74 allows use of material regardless of source; illegality or flaws in section 67 search do not vitiate valid adjudication: HC *  Inter-State transfer of ITC on Amalgamation permissible as given under section 18(3) read with rule 41 of the CGST rules, 2017: Gujarat High Court *  HC: No GST on commisson paid to Pigmy Agents *  IGST refund denial on illegible bill of lading invalid absent chance to furnish docs; merit reconsideration in appeals directed: HC *  ITC is not admissible on GST paid on leasehold rights of land used fpr setting up an air seperation plant: AAAR,Tamil Nadu *  GST: No penalty under Section 74 after voluntary ITC reversal due to non-existent supplier : High Court *  TN AAAR denies GST ITC on Land Lease under Sec. 17(5)(d) for setting up plant and machinery *  GST proceedings quashed as notices sent to old address, despite updated address in registration *  Importer Can’t Be Penalised for Alleged IGCR Procedural Lapses Without Evidence of Departmental Error: CESTAT *  Structured Healthcare Training Not ‘Charitable Activity’, 18% GST Payable: AAR  *  CESTAT As The Appellate Authority For Central Sales Tax Disputes: A Paradigm Shift Under Finance Act, 2023 *   Rs. 25K Cost Imposed On SGST Joint Commissioner for Attaching Bank  Accounts Without Forming Mandatory “Opinion”: Bombay HC *   Ex-Parte GST Order Without Hearing Violates Natural Justice: Karnataka  High Court Quashes Adjudication and Bank Attachment.  *   Retrospective GST Cancellation Can’t Invalidate Genuine Transactions:  Jaipur Commissioner (Appeals) Quashes Rs. 95,670 ITC Demand. *   GST Pre-Deposit Non-Compliance: Allahabad High Court Allows Appeal  Subject to Rs. 30 Lakh Balance Deposit, Recognises Offline Filing. *  Documentary Nature of Evidence: Allahabad High Court Grants Bail in Rs. 32.66 Crore Fake ITC Fraud Case *  Supreme Court Flags Systemic Bias in Army’s Permanent Commission Process for Women Officers *  Re-Determination of Land Compensation Can Be Based on Appellate Court Awards, Clarifies Scope of S. 28-A: Supreme Court. *  Supreme Court Imposes Rs. 5 Lakh Costs On Rent Authority Officer For Acting Beyond Jurisdiction. *  DGGI Meerut | Court Denies Bail to Accused in Claiming Fake ITC And Export Refunds *  Denial of GST Rate Revision Benefit to Contractor Violates Article 14: Rajasthan HC *  GST Registration Cancellation for Non-Filing of Returns: Gauhati High Court Directs Restoration on Compliance. *   Supreme Court Quashes FEMA Adjudication Orders, Revives Proceedings at  Show Cause Stage. *   Higher Rank, Harsher Punishment Justified: Supreme Court Restores Dismissal  of Bank Manager in Misappropriation Case. *   Limitation for Export Refund to Be Counted from Foreign Exchange Realisation,  Not From Export Invoices Issuance: CESTAT  

Comments

Print   |    |  Comment

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. 

************

Department News


Query

 
PRADEEP JAIN, F.C.A.

Head Office : -

Address :
"SUGYAN", H - 29, SHASTRI NAGAR, JODHPUR (RAJ.) - 342003

Phone No. :
0291 - 2439496, 0291 - 3258496

Mobile No. :
09314722236

Fax No. :0291 - 2439496


Branch Office : -

Address:
1008, 10th FLOOR, SUKH SAGAR COMPLEX,
NEAR FORTUNE LANDMARK HOTEL, USMANPURA,
ASHRAM ROAD, AHMEDABAD-380013

Phone No. :
079-32999496, 27560043

Mobile No. :
093777659496, 09377649496

E-mail :pradeep@capradeepjain.com