2009 (8) TMI 894 - AT - Central Excise

Tribunal Limits Penalty to 25% of Duty Amount under Section 11AC of Central Excise Act

CCE. & C., AURANGABAD Versus OM SAIRAM STEEL & ALLOYS PVT. LTD.

The Tribunal held that under Section 11AC of the Central Excise Act, 1944, if duty is paid before the show cause notice, penalty is restricted to 25% of ... - Issues involved: Imposition of penalty under Section 11AC of the Central Excise Act, 1944 when duty is paid before the issuance of show cause notice.Main Issue: Imposition of penalty of Rs. 3,25,000/- under Section 11AC.a) Whether penalty under Section 11AC can be imposed if duty is paid before show cause notice:- The Revenue appealed for enhancement of penalty to the equivalent duty amount.- The assessee contended that penalty is not imposable as duty was paid before show cause notice.b) Quantum of penalty when duty is paid before show cause notice:- The key question was determining the quantum of penalty under Section 11AC.Judgment Details:- The Tribunal referred to the case of Union of India v. Rajasthan Spinning & Weaving Mills where 100% penalty under Section 11AC was upheld even if duty is paid before the show cause notice.- Section 11AC states that if duty and interest are paid within 30 days of the order, penalty is 25% of the duty amount, otherwise 100%.- The purpose of the Section and provisos is to provide a benefit to the assessee for prompt duty payment.- As the duty was paid before the show cause notice, the penalty was restricted to 25% of the duty demand of Rs. 5,67,934/-.- The assessee was directed to pay the reduced penalty within 30 days, failing which 100% penalty would be applicable.- Both the Revenue's and the assessee's appeals were disposed of on 28-8-2009.