Tribunal upholds penalty for duty suppression despite payment timing, citing Section 11AC

The Tribunal reinstated the penalty on the respondent under Section 11AC of the Act for suppression of facts with intent to evade Central Excise duty, despite duty payment before the notice. The Tribunal held that once suppression of facts was established, the penalty was mandatory, rejecting the argument that duty payment timing negated the penalty. The department's appeal was successful in overturning the lower appellate authority's decision to set aside the penalty.

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Issues: Whether penalty u/s 11AC of the Act is liable to be imposed on the respondent for suppression of facts with intent to evade Central Excise duty.

Summary:
1. The appeal filed by the Revenue questioned the imposition of penalty on the respondent under Section 11AC of the Act for shortage of finished goods found at the factory. The department issued a show-cause notice proposing penalty, duty payment, and interest. The original authority imposed a penalty, which was later set aside by the Commissioner (Appeals) based on a previous Tribunal decision.

2. The Revenue argued that penalty under Section 11AC is justified due to suppression of production with intent to evade duty, regardless of duty payment before the notice, citing a Supreme Court decision.

3. The respondent contended that the burden of proof was on the department to establish clandestine removal of goods, which they failed to do. They also claimed that proper stock verification was not conducted, and referred to various Tribunal decisions and a Supreme Court judgment to support their stance.

4. The Tribunal noted that the duty liability was never disputed by the respondent, as confirmed by statements of company functionaries. The lower appellate authority set aside the penalty based on duty payment before the notice and absence of mala fides, which the Tribunal found unsustainable. The Tribunal held that the penalty under Section 11AC was mandatory once suppression of facts was established, irrespective of duty payment timing.

5. Consequently, the department's appeal succeeded, and the penalty on the respondent was reinstated by the Tribunal.

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