High Court sets aside Tribunal's decision denying reduced penalty, emphasizes statutory benefits and proper adjustments.

Tilrode Chem (P.) Ltd. Versus Commissioner of Central Excise, Bangalore - II

Tilrode Chem (P.) Ltd. Versus Commissioner of Central Excise, Bangalore - II - 2014 (314) E.L.T. 9 (Kar.) Issues Involved:
1. Entitlement of the assessee to the benefit of reduced penalty under the proviso to Section 11AC of the Central Excise Act, 1944.
2. Adjustment of excess tax paid towards the liability of reduced penalty.

Detailed Analysis:

Entitlement to Reduced Penalty under Proviso to Section 11AC:
The core issue in this case revolves around whether the assessee is entitled to the benefit of reduced penalty as per the proviso to Section 11AC of the Central Excise Act, 1944. The Tribunal had declined the assessee's request for reduced penalty, interpreting the Supreme Court's decision in Union of India v. Dharamendra Textiles Processors, which mandates that the penalty payable is equal to the duty and leaves no discretion to the authority to reduce the penalty.

The High Court clarified that while the penalty is indeed a civil liability and mandatory as per the Dharamendra Textiles Processors judgment, the proviso to Section 11AC offers a concession. If the assessee pays the penalty within 30 days from the date of the order, they are entitled to a 25% reduction in the penalty. This provision was not considered in the Dharamendra Textiles Processors case, and thus, the Tribunal should have examined whether the assessee fulfilled the conditions for this concession.

Adjustment of Excess Tax Paid:
The second issue pertains to whether the assessee is entitled to adjust any excess tax paid towards the liability of the reduced penalty. The High Court noted that if the assessee has paid an excess amount, this should be adjusted against the duty due. If, after adjustment, no duty or interest is payable, the imposition of a penalty would not arise. The Tribunal was directed to consider this aspect based on the materials provided by the assessee.

Conclusion and Order:
The High Court concluded that the Tribunal erred in its refusal to consider the assessee's entitlement to the reduced penalty and the adjustment of excess tax paid. The Tribunal's decision was set aside, and the matter was remanded for fresh consideration, with specific instructions to take into account the observations made by the High Court.

Final Order:
1. The appeal was allowed.
2. The impugned order of the Tribunal was set aside.
3. The substantial questions of law were answered in favor of the assessee and against the revenue.
4. The matter was remanded to the Tribunal for fresh consideration, keeping in mind the High Court's observations.

The High Court's judgment emphasizes the need for the Tribunal to consider the statutory benefits available to the assessee under the proviso to Section 11AC and to ensure that any excess payments made by the assessee are duly adjusted.