High Court rules for appellant manufacturer in central excise duty case, orders penalty payment upheld.

The High Court ruled in favor of the appellant, a manufacturer of washing machines and dryers, in a case involving under-valuation and willful suppression of facts leading to a short payment of central excise duty. The Court held that the penalty reduction from Rs.31,516 to Rs.15,000 by the Central Excise and Service Tax Appellate Tribunal was not justified. The penalty was ordered to be the same as the duty amount, requiring the respondent to pay the original penalty of Rs.31,516 within 12 weeks from the judgment date.

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Issues: Whether the penalty imposed under Section 11AC of the Central Excise Act, 1944 could be reduced by the appellate tribunal when the duty demand was upheld.

Analysis: The duty demand was confirmed by the authorities below. The judgment relied on the Supreme Court decision interpreting Section 11AC, under which the penalty attracted by suppression or undervaluation is not discretionary and follows the statutory mandate. Once the demand stood upheld, the penalty could not be arbitrarily reduced to an amount lower than the duty-related liability fixed by the adjudicating authority.

Conclusion: The reduction of penalty from Rs.31,516/- to Rs.15,000/- was impermissible and was set aside. The respondent was held liable to pay Rs.31,516/- as penalty.

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