2012 (10) TMI 496 - HC - Central Excise

Court invalidates penalty due to payment before notice, lacks jurisdiction. Revenue's appeal rejected.

The High Court upheld the decision to set aside the penalty imposed on the assessee by the Tribunal. The Court found that since the duty with interest was ... Penalty – assessee stopped paying duty on the ground that it is not excisable to tax. However, after the department noticed the default and brought to their notice, they have paid the duty and the interest even before the issue of a show cause notice – Held that:- Assessee has paid the duty with interest even prior to issue of show cause notice. If that is so, the authorities had no jurisdiction to initiate proceedings at all and consequently, the question of payment of penalty would not arise at all Issues:Challenge to order setting aside penalty by Tribunal.Analysis:The case involves a revenue's appeal challenging a Tribunal's order that upheld an Appellate Commissioner's decision to set aside a penalty. The assessee, engaged in manufacturing cut and grooved ACP classified as excisable to duty under Chapter sub-heading 7610.90, stopped paying duty in 2002, claiming it was not excisable. Upon the department's notice, the duty and interest were paid before a show cause notice was issued. Subsequently, an adjudication by the Assessing Authority found duty payable, along with interest and an equal amount of penalty. The Appellate Commissioner set aside the penalty and interest but upheld the duty levy. The Tribunal then reversed both the Appellate Commissioner and the Original Authority's decisions, holding the goods were not excisable to tax. The revenue appealed the Tribunal's decision in CEA No. 17/2007, which was allowed, upholding the duty levy but not interfering with interest and penalty. The current appeal challenges the setting aside of the penalty order.The High Court found that since the assessee had paid the duty with interest even before a show cause notice was issued, the authorities lacked jurisdiction to initiate proceedings. Therefore, the question of imposing a penalty did not arise. Consequently, the Court rejected the appeal, noting the lack of merit in challenging the order setting aside the penalty. The Court's decision was based on the principle that if duty and interest were paid prior to any formal notice, the authorities could not proceed with penalty imposition, as there was no valid cause for initiating penalty proceedings.