2011 (3) TMI 1123 - AT - Central Excise

Appeal granted with conditions: pay interest, penalty within 30 days. Non-compliance incurs penalty.

The appeal was allowed on the condition that the respondent pays the interest and penalty as specified within the given timeframe for the matter to be ... Penalty equivalent to duty demanded under Section 11AC - payment and relief mechanism under sub-section (1A) of Section 11A - interest exigible under Section 11AB - opportunity to make payment for final closure/compoundingPayment and relief mechanism under sub-section (1A) of Section 11A - interest exigible under Section 11AB - penalty equivalent to duty demanded under Section 11AC - Whether the respondent could be afforded relief under sub-section (1A) of Section 11A despite not having paid interest and 25% penalty before adjudication, where the remaining duty was paid within 11 days of issuance of the show cause notice and before adjudication. - HELD THAT: - The Tribunal noted that sub-section (1A) of Section 11A operates only where the duty is paid (in full or in part) along with applicable interest and 25% of such duty as penalty. In the present case duty was initially deposited during investigation and the balance of the duty demanded was paid within 11 days of the show cause notice and before adjudication; however, interest and the 25% penalty were not paid. The original adjudication order did not offer the option of paying 25% of the duty as penalty under Section 11AC. Applying the statutory scheme and having regard to the facts that the balance duty was made good prior to adjudication, the Tribunal exercised its appellate discretion to permit the respondent to pay the applicable interest under Section 11AB and 25% of the total duty demanded within 30 days of receipt of the Tribunal's order for final closure. The Tribunal made clear that failure to make such payment within the stipulated period would render the respondent liable to pay penalty equal to the duty evaded. [Paras 3, 4, 5]The appeal is allowed by permitting the respondent to pay the applicable interest and 25% of the total duty demanded within 30 days for final closure; failure will attract penalty equal to duty evaded.Final Conclusion: The departmental appeal is allowed on terms: respondent granted 30 days to pay applicable interest and 25% of the duty demanded for final closure; non-payment within the stipulated period will result in penalty equal to the duty evaded. Issues:1. Duty liability and penalty payment under Section 11A and 11AC of the Act.Analysis:The case involves an appeal filed by the department regarding shortages of raw material and finished goods found during a surprise check. The respondent paid an amount during the investigation stage, and a Show Cause Notice demanding duty was issued. The Adjudication order confirmed the duty demanded and imposed a penalty under Section 11AC equal to the total duty demanded. The Commissioner (Appeals) gave relief to the respondent on the penalty, stating that since the duty demanded had been paid before the show cause notice, no penalty was applicable. The department filed an appeal, arguing that the respondent did not discharge the full duty liability and 25% of the penalty as required. The interest was also not paid.The provision of sub-section (1A) of Section 11A states that duty liability should be paid along with interest and 25% of such duty as penalty. In this case, although part of the duty was paid, interest and penalty were not paid. However, the remaining duty demanded was paid within 11 days from the issue of the Show Cause Notice and before adjudication. The order-in-original did not provide the option to pay 25% of the duty amount as penalty as per Section 11AC. Therefore, the Tribunal decided to give the respondent an opportunity to pay interest and 25% of the total duty demanded within 30 days for a final closure of the matter. Failure to make this payment within the stipulated period would result in a penalty equal to the duty evaded.In conclusion, the appeal was allowed on the condition that the respondent pays the interest and penalty as specified within the given timeframe for the matter to be finally resolved.