2010 (9) TMI 390 - HC - Central Excise

High Court rules penalties not applicable under Section 11AC due to lack of evidence

COMMISSIONER OF CENTRAL EXCISE Versus SHREE KHODIYAR ROLLING MILLS

The High Court held that penalties under Section 11AC of the Central Excise Act were not applicable as there was no evidence of clandestine removal or ... Penalty – mandatory penalty - no clandestine removal nor there is short levy of duty - provisions under Section 11AC of the Act not arises - Adjudicating Authority as well as the final fact finding authority have come to the conclusion that when ingredients of Section 11AC are not satisfied - no question of levying any penalty under that Section – appeal is dismissed.The Commissioner has simply relied on the statement of Mr. Hitesh C. Shah. However, on the basis of the said statement, it cannot be said that there was an intention to evade the payment of duty. We are, therefore, of the view that the Tribunal has rightly set aside the order passed by the Commissioner (Appeals). Issues:1. Interpretation of penalty provisions under Section 11AC of the Central Excise Act, 1944.Analysis:The case involved an appeal filed by the Commissioner of Central Excise, Bhavnagar under Section 35-G of the Central Excise Act, 1944, questioning the correctness of the decision regarding the imposition of a penalty equivalent to the amount of duty under Section 11AC of the Act. The Assistant Commissioner initially confirmed a demand under Rule 14 of the Cenvat Credit Rules, 2004 and Section 11A of the Central Excise Act, 1944. The Commissioner (Appeals) modified the order, imposing a penalty equal to the confirmed duty amount based on evidence of the respondent's awareness of goods shortage and improper Cenvat Credit utilization. However, the Tribunal set aside the penalty, stating that there was no admission of clandestine removal and the penalty under Section 11AC was unwarranted.The High Court analyzed the case, noting that the Assistant Commissioner found no evidence of clandestine removal or duty evasion, hence not invoking Section 11AC penalties. The Court emphasized that without Section 11AC applicability, no penalty could be levied under that provision. The Commissioner's reliance on a statement was deemed insufficient to prove an intention to evade duty payment. The Court agreed with the Tribunal's decision to set aside the Commissioner (Appeals) order, as the essential conditions for Section 11AC penalties were not met.Furthermore, both the original Adjudicating Authority and the Tribunal concurred that in the absence of satisfying Section 11AC requirements, no penalty could be imposed under that provision. The High Court upheld the Tribunal's decision, stating that no substantial question of law arose from the Tribunal's order, leading to the dismissal of the appeal. The judgment emphasized the importance of meeting the statutory requirements for imposing penalties under Section 11AC and highlighted the significance of evidence and intention in establishing duty evasion for penalty purposes.