Whether in the facts and circumstances of the case, the Tribunal has committed a substantial error of law in reducing the mandatory penalty imposed on the respondent-assessee under Section 11AC of Central Excise Act, 1944 to the extent of 25% despite havi

PJ/Case Laws/2012-13/1138

Case: COMMISSIONER OF C. EX. CUS., SURAT-II V/S SUNCITY SYNTHETICS

Citation: 2011 (273) E.L.T. 211 (Guj.)

Issue:- 1. Whether in the facts and circumstances of the case, the Tribunal has committed a substantial error of law in reducing the mandatory penalty imposed on the respondent-assessee under Section 11AC of Central Excise Act, 1944 to the extent of 25% despite having confirmed the duty on account of clandestine removal and evasion of Central Excise duty?
                 2. Whether or not the benefit of reduced penalty under proviso to Section 11AC of the Central Excise Act, 1944 can be extended to such person who has not paid amount of interest determined by the adjudicating authority payable under Section 11AB of the Central Excise Act, 1944?
                3. Whether the adjudicating authority is statutorily obliged to set out in his order the availability of benefit of reduced penalty prescribed under proviso to Section 11AC of the Central Excise Act, 1944 and to give option to such person liable for penalty under Section 11AC of the Central Excise Act, 1944?

Brief Facts: - The Commissioner of Central Excise & Customs, Surat-I has filed this Tax Appeal under Section 35G of the Central Excise Act, 1944 proposing to formulate the substantial questions of law for determination and consideration of this Court that whether in the facts and circumstances of the case, the Tribunal has committed a substantial error of law in reducing the mandatory penalty imposed on the respondent-assessee under Section 11AC of Central Excise Act, 1944 to the extent of 25% despite having confirmed the duty on account of clandestine removal and evasion of Central Excise duty. The show cause notice was issued on 21-9-2004. The adjudicating authority has passed order dated 28-2-2005 demanding duty of Rs. 2,32,620/- and to recover interest at the appropriate rate on the delayed short payment under Section 11AB of the Central Excise Act, 1944 and imposed penalty of Rs. 2,32,620/- under Section 11AC of the Central Excise Act, 1944 on the respondent. The respondent preferred Appeal and the Appellate Commissioner by his order dated 30-5-2007 dismissed the Appeal of the respondent. Therefore, the respondent filed Appeal before the Tribunal and Tribunal by its order dated 17-7-2008 passed order reducing penalty to the extent of 25% of duty amount. The Tribunal has reduced the penalty on the ground that the duty has been paid before the issuance of the show cause notice. However, there is nothing on record to show the date on which the respondent has made payment of duty.

Appellant’s Contention: - The appellant submitted that the Tribunal has not recorded any reasons setting out facts of the case of the respondent and has mechanically passed order extending benefit of reduced penalty on the respondent. He has further submitted that the team of Central Excise Officers had carried search of the respondent's premise on 31-3-2000 and detected evasion of Central Excise duty payable by the respondent as on the date of the said search. He further submitted that the respondent has not complied with the preconditions for availment of benefit of reduced penalty under proviso to Section 11AC of the Central Excise Act, 1944 and, therefore, the impugned order of the Tribunal is liable to be set aside. Further he submitted that the decision of the Delhi High Court in the case of K.P. Pouches (P) Ltd., reported in 2008 (228) E.L.T. 31 (Del.), cannot be applied to the case of the respondent inasmuch as in the case of K.P. Pouches (P) Ltd. (supra) the adjudicating authority has not ordered recovery of interest under Section 11AB of the Central Excise Act, 1944 because in the said case the assessee had deposited total amount of duty payable under Section 11A(2) of the Act on the date of detection of evasion of duty itself. He has further submitted that the decision in the case of Malbro Appliances P. Ltd., reported in 2007 (208) E.L.T. 503 (Del.) = 2007 (5) S.T.R. 256 (Del.), also cannot be applied because the facts of the case on hand are not identical to the facts of the case of the assessee in the Malbro Appliances P. Ltd. (supra). On the contrary, in view of settled proposition laid down by the Punjab and Haryana Court in the case of Machino Montell (I) Ltd. reported in 2006 (4) S.T.R. 177 (P & H) = 2006 (202) E.L.T. 398 (P & H) as well as judgments of the Apex Court in the case of Rajasthan Spinning & Weaving Mills, reported in 2009 (238) E.L.T. 3 (S.C.), Dharamendra Textile Processors, reported in 2008 (231) E.L.T. 3 (S.C.), and decisions of the Tribunal in the case of Jawala Steels Pvt. Ltd., reported in 2009 (238) E.L.T. 694 (Tri. - Kolkata), and Ponneri Steel Industries, reported in 2009 (238) E.L.T. 295 (Tri. - Chennai) and such other cases, the Tribunal was required to allow department to levy penalty on the respondent for the amount equivalent to his duty liability and pass order accordingly. He further submitted that the impugned order of the Tribunal is in disregard of the law laid down by this Court in Tax Appeal No. 140 of 2008 [2009 (234) E.L.T. 24 (Guj.)] and Special Civil Application No. 22931 of 2005 and such other judgments, which obligate upon the Tribunal to record cogent reasons in support of conclusion arrived at by him in passing the final order. In support of this submission he also relied on the following decisions
(i) Coats Viyella India Ltd. v. Commissioner of Central Excise, 2004 (173) E.L.T. 229 (S.C.)
(ii) Tata Engineering & Locomotive Co. Ltd. v. Collector of Central Excise, 2006 (203) E.L.T. 360 (S.C.)
(iii) Commissioner of Central Excise v. Wimco Ltd., 2007 (217) E.L.T. 3 (S.C.)
(iv)Commissioner of Central Excise v. GTC Industries Ltd., 2008 (228) E.L.T. 505 (S.C.) = 2009 (16) S.T.R. 516 (S.C.);
(v)Commissioner of Central Excise v. Srikumar Agencies 2008 (232) E.L.T. 577 (S.C.) = 2009 (13) S.T.R. 3 (S.C.)
(vi)Steadfast Paper Mills v. Collector of Central Excise, 1983 (12) E.L.T. 744 (Guj.).

Reasoning of Judgment: - The Hon’ble High Court held that as a matter of fact, all the questions reframed by the appellant are different facets of the main question as to whether the Tribunal is justified in reducing the penalty to 25% of the duty leviable on the respondent. All these aspects of the main question are already considered by this Court in its order dated 18-11-2009 in the case of Messers Exotic Associates v. Commissioner of Central Excise (Tax Appeal No. 572 of 2007 with Tax Appeal No. 869 of 2007 [2010 (252) E.L.T. 49 (Guj.)] and Tax Appeal No. 1942 of 2008, in the case of Commissioner of Central Excise & Customs v. Rama Synsilk Mills P. Ltd., decided on 21-1-2010 [2010 (254) E.L.T. 277 (Guj.)]. This Court after considering the decision of Commissioner of Central Excise v. Malbro Appliances, 2007 (79) RLT 109 (Delhi) = 2007 (208) E.L.T. 503 (Del.) = 2007 (5) S.T.R. 256 (Del.), Union of India v. Dharamendra Textiles, 2000 (231) E.L.T. 3 (S.C.), Union of India v. Rajasthan Spinning & Weaving Mills, 2009 (238) E.L.T. 3 (S.C.), K.P. Pouches (P) Ltd., v. Union of India, 2008 (228) E.L.T. 31 (Delhi),Commissioner of Central Excise, Rohtak v. J. R. Fabrics Pvt. Ltd., 2009 (238) E.L.T. 209, has taken the view that the order passed by the Tribunal retaining the penalty of 25% of the duty amount seems to be quite justified. However, the appellant has made two more submissions in this Tax Appeal. He has emphatically stated that the respondent has not complied with pre-condition for availment of benefit of reduced penalty under proviso to Section 11AC of the Central Excise Act, 1944. As per the first proviso, the duty amount was not paid with interest and even the reduced penalty of 25% is not deposited by the respondent within 30 days from the date of such determination, as required under second proviso to Section 11AC of the Act. So far as second issue is concerned, the appellant submitted that the adjudicating authority is not under any statutory obligation to set out in its order the availability of benefit of reduced penalty prescribed under proviso to Section 11AC of the Central Excise Act and to give an option to such person liable for penalty under that Section. Both these issues were dealt with by this Court in Tax Appeal No. 572 of 2007 with Tax Appeal No. 869 of 2007 decided on 18-11-2009. It is also important to note that the adjudicating authority has not calculated the interest neither in the order-in-original nor even thereafter. It is, therefore, too much to expect from the respondent-assessee to pay the interest along with the duty amount in absence of such calculation of interest. As far as statutory obligation of the adjudicating authority is concerned, the Central Excise Department itself has issued Circular on 22-5- 2008 wherein it is clarified that in all cases wherein penalty under Section 11AC of the Act is imposed the provisions contained in the first and second proviso of Section 11AC should be mandatorily mentioned in the order-in-original itself by the adjudicating authority. It is, therefore, not open for the revenue to agitate this issue before the Court in contradiction of the Circular issued by the Central Excise Department. This Court in Messers Exotic Associates (supra) has directed the adjudicating authority to pass a fresh order giving option to the assessee to pay the duty amount within 30 days by making it explicitly clear in the order itself that if the assessee wants to avail such option he is permitted to do so. In the case on hand since the duty amount has already been paid by the respondent-assessee and if the interest and/or reduced penalty of 25% were not paid by the respondent assessee, the adjudicating authority may send a communication to the respondent-assessee indicating therein that the particular amount of interest and/or 25% of the penalty of the duty amount is not paid by the respondent-assessee and hence if the assessee wants to avail the benefit of the reduced penalty of 25%, such amount of interest and/or penalty of 25% should be paid within 30 days from the date of receipt of such communication, failing which they would be liable to pay penalty under Section 11AC equivalent to the amount of duty.

Decision: - The case was remanded.

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PJ/Case Laws/2012-13/1138

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