2010 (12) TMI 158 - AT - Central Excise

Tribunal reduces penalty to 25% of duty amount if paid promptly

Commissioner of Central Excise, Chennai Versus Indrad Auto Ltd.

The Tribunal held that despite payment of duty before the show-cause notice, the respondent was liable for penalty and interest. However, following the ... Demand - Duty, interest, and penalty - The lower appellate authority who has upheld the demand of duty but has set aside the penalty and interest leading to these appeals by the department - duty demanded is paid by the assessee before issue of the show cause notice - High Court in the case of K.P.Pouches (P) Ltd. Vs UOI [2008 -TMI - 30328 - HIGH COURT OF DELHI], the respondent-assessee is entitled to determination of lower penalty equal to 25% of the duty amount subject to the condition that they have paid this amount within one month from the date of the order of adjudication along with duty and interest amounts. Issues: Duty demand confirmation, penalty imposition under Section 11AC, interest levy, payment of duty before issue of show-cause notice, subsequent decisions' applicability, determination of penalty amount, refund of penalty and interest, compliance with tribunal orders.In this case, the original authority confirmed a duty demand of Rs.70,376/- and imposed a penalty of Rs.35,000/- under Section 11AC of the Central Excise Act, 1944, along with levying interest at the appropriate rate. Both parties appealed to the lower appellate authority, which upheld the duty demand but set aside the penalty and interest. The department then appealed against this decision. The lower appellate authority's reason for setting aside the penalty and interest was the payment of duty by the respondent before the issue of the show-cause notice.The Tribunal referred to the Supreme Court's decision in Union of India Vs Dharamendra Textile Processors, stating that payment of duty before the issue of show-cause notice does not absolve the respondent from penalty and interest. However, considering the Delhi High Court's decision in K.P.Pouches (P) Ltd. Vs UOI, the respondent may be liable for a lower penalty of 25% of the duty amount if paid within one month from the date of adjudication order, along with duty and interest amounts.The consultant for the respondent confirmed that duty was paid before the show-cause notice, and penalty and interest equal to 25% of the duty were paid within one month of receiving the adjudication order. Consequently, the Tribunal set aside the lower appellate authority's orders regarding penalty and interest, holding the respondent liable for penalty equal to the duty amount under Section 11AC and interest under Section 11AB. However, due to the early payment and compliance, the respondent was only required to pay 25% of the duty demand as penalty, amounting to Rs.17,594/-. The appeals were allowed on these terms.The respondent's consultant acknowledged that the penalty and interest amounts previously paid were refunded after the lower appellate authority's order. He agreed to deposit these amounts within one month from the Tribunal's decision to comply with the orders.