Whether equal penalty under section 11AC imposable when none of the ingredients for its levy present?

PJ/Case Law/2013-14/2007

Case:-COMMISSIONER OF CUSTOMS AND C EX., MEERUT VERSUSAMRIT VARSHA ISPAT (P) LTD.

Citation:-2013 (298) E.L.T. 460 (Tri.- Del.)

Brief facts:-This is an appeal filed by the Revenue against order in appeal No. 198/M1a-1/10, dated 30-8-2010 passed by Commissioner (Appeals) of Customs and Central Excise, Meerut. Brief facts of the case are that M/s. Amrit Varsha lspat (P) Ltd. (hereinafter referred to as respondents) are engaged in the manufacture of MS ingots falling under Chapter 72 of the Central Excise Tariff. Central Excise officers visited their factory on 13-8-2008 and shortage of 27.075 MT of MS ingots was detected during the course of physical verification of the stock. The respondents agreed to the shortage found during physical verification and subsequently deposited the duty amounting to Rs. 1,13,222/- on 14-8-2008. A show cause notice dated II-8-2009 was issued demanding duty of Rs. 1,13,222/- and also proposing penalty under Rule 25(I)(a) and (b) of Central Excise Rules, read with Section 11AC of the Central Excise Act. The show cause notice was adjudicated by the original adjudicating authority by order-in-original dated 23-2-2010 in which the original adjudicating authority confirmed duty and appropriated the amount already deposited and also imposed penalty of Rs. I,13,222/- under Rule 25 read with Section 11AC of the Central Excise Act. The respondents filed an appeal against order-in-original before Commissioner (Appeals) who vide their impugned order had reduced the penalty from Rs. 1,13,222/- to Its. 25,000/-. Revenue has challenged this impugned order in this appeal.

Appellant’s contention:-The appellant submits that on the date of visit to the factory, shortage of goods was detected which was admitted by the respondents and they have deposited the duty amount. Since this is a case of clandestine removal, penalty equal to duty is required to be imposed on the respondents under Section 11AC of the Central Excise Act. He therefore, submits that Commissioner (Appeals) has not appreciated the facts in proper perspective and reduced the penalty to Rs. 25,000/-. He requests that order-in-appeal needs to be set aside and penalty is required to be enhanced to Rs. 1,13,222/-

Respondent’s contention:-The respondent submits that they have filed cross-objection and challenged the appeal on the ground that there was no ingredient mentioned in Section 11AC proposed in the show cause notice and discussed by the original authority in order-in-original. Under Section 11AC, penalties areimposable if there are ingredients of suppression, willful misstatement or suppression of facts on the part of the assessee. In the present case, after visit of the Central Excise officers, the respondents paid the duty on the very next day. In such a scenario, there is no case for imposition of penalty equal to demand of duty.

Reasoning of judgment:-After hearing both sides, the tribunal find that Commissioner (Appeals) in the impugned order has observed that Section 11AC of the Central Excise Act is applicable for imposition of amount of penalty equal to the duty only if duty was demanded for the reasons of fraud, collusion or any willful misstatement or suppression of facts. The Commissioner (Appeals) after going through order-in-original came to conclusion that no such ingredient has been mentioned either in the show cause notice or in the order-in-original. In the absence of which it is difficult to sustain the penalty equal to duty amount in the present case. They find that finding of the Commissioner (Appeals) has considerable force and in the absence of any suppression or willful misstatement or collusion, it is difficult to invoke Section 11AC in the present case. They therefore, uphold the order-in-appeal and reject the appeal filed by the respondents. Appeal rejected.

Decision:-Appeal rejected.

Comment:-The gist of the case is that when none of the ingredients required for levy of penalty under section 11AC i.e., fraud, suppression, willful misstatement etc. are present, equal penalty is not imposable under section 11AC. It is worth mentioning here that this analogy is against the Supreme Court judgement given in the case of Dharmendra Textiles Case wherein it was held that equal penalty is imposable when the provisions of section 11AC are invoked and that the adjudicating authority does not has discretion to levy reduced penalty under this section.

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PJ/Case Law/2013-14/2007

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