2015 (5) TMI 245 - HC - Central Excise

High Court Upholds Mandatory Interest & Penalties under Central Excise Act

Commissioner of Central Excise Versus Customs, Excise and Service Tax Appellate Tribunal and M/s. HCL Peripherals

Commissioner of Central Excise Versus Customs, Excise and Service Tax Appellate Tribunal and M/s. HCL Peripherals - 2015 (321) E.L.T. 86 (Mad.) Issues involved:1) Challenge to order of Appellate Tribunal by Revenue2) Imposition of interest and penalty under Central Excise Act3) Interpretation of Sections 11AB and 11AC of the ActIssue 1: Challenge to order of Appellate Tribunal by RevenueThe Revenue challenged the order of the Appellate Tribunal, which dismissed their appeal. The High Court framed substantial questions of law for consideration. The main contention was whether interest on duty can be levied under Section 11AB and penalty imposed under Section 11AC if duty was paid before the issuance of a show cause notice, despite legal provisions under the Central Excise Act, 1944. The Court analyzed the case to determine if the Tribunal erred in relying on case law not applicable to the present situation.Issue 2: Imposition of interest and penalty under Central Excise ActThe case involved a manufacturer and service provider of computer peripherals and parts who received a show cause notice for service tax, interest under Section 11AB, and penalties under Section 11AC and Rule 25 of the Central Excise Rules, 2002. The Commissioner (Appeals) upheld the duty demand but set aside the interest and penalty based on Supreme Court judgments. The Tribunal confirmed the Commissioner's decision, leading the Revenue to appeal. The High Court examined the legal position on the mandatory imposition of penalties under Section 11AC, citing relevant Supreme Court judgments.Issue 3: Interpretation of Sections 11AB and 11AC of the ActRegarding the imposition of penalties under Section 11AC, the High Court referenced Supreme Court decisions emphasizing the mandatory nature of penalties under this provision. The Court highlighted that once Section 11AC applies, authorities have no discretion in quantifying penalties. Additionally, the Court addressed the challenge to interest levied under Section 11AB, clarifying that the provision was applicable from 1996 and remains relevant despite changes in interest rates in 2001. The Court concluded that interest and penalties are imposable without discretionary power to waive them, overturning the Tribunal's decision and ruling in favor of the Revenue.In conclusion, the High Court set aside the Tribunal's order and allowed the Revenue's appeal, emphasizing the mandatory imposition of interest and penalties under the Central Excise Act.