2014 (5) TMI 250 - HC - Central Excise

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

The High Court allowed the appeal, setting aside the Tribunal's decision that denied the assessee the benefit of reduced penalty under the proviso to ... Penalty u/s 11AC - benefit of reduced penalty, if the payment of penalty as determined is paid within the time stipulated therein - adjustment of excess tax paid towards liability of reduced penalty - Held that:- it is clear that non-payment of duty attracts interest and equal amount of penalty. But if there is prompt payment of duty and interest, within the time prescribed under the proviso to Section 11AC of the Act, the assessee has the benefit of reduced payment of penalty as stipulated therein. Whether assessee is entitled to the said benefit is a question of fact which has to be gone into on the basis of the materials placed by the assessee before the authorities. Here the Tribunal was in error in refusing to look into the said material on the ground that the High Court has issued a direction to consider the case keeping in mind the judgment of the Apex Court in the Dharamendra's Textiles Processors (2007 (7) TMI 307 - SUPREME COURT OF INDIA) case, as extracted above. If the assessee has paid excess payment, the excess payment should be adjusted towards the amount due and after deduction, no duty is payable or no interest is payable, the question of imposing penalty would not arise at all. Penalty is leviable only for non payment of duty and interest and in terms of the orders of assessment. If the excess paid amount is taken into account, adjusted towards the duty, the question of imposing penalty would also not arise. - matter remanded to the Tribunal for fresh consideration - Decided in favor of assessee. 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.