2015 (10) TMI 509 - HC - Central Excise

Appellant entitled to penalty reduction under Section 11AC Central Excise Act; Compliance and clarity emphasized.

M/s Chandra Metal Enterprises Versus Deputy Commissioner, Central Excise, Agra

The appellant was entitled to the first and second proviso to Section 11AC of the Central Excise Act, 1944, allowing a penalty of 25% of the duty amount ... Penalty u/s 11Ac - Benefit of reduced penalty - whether the appellant was entitled to the first and second proviso to Section 11AC of the Central Excise Act, 1944 with regard to the payment of penalty to the tune of 25% - Held that:- Penalty equal to the duty amount of ₹ 93,112.00 was imposed. It is also clear that the duty had already been deposited prior to the issuance of the show cause notice. We also find that the Superintendent,Central Excise, Agra had issued an order dated 01.08.2013 in which it was indicated that the appellant had deposited a sum of ₹ 23,278.00 i.e. 25% of the penalty. - adjudicating order requires the quantification of the penalty to be made in terms of the first and second proviso of Section 11AC of the Act so that an incentive is given to the assessee to pay the duty and interest within the stipulated period in order to avail payment of duty at reduced rate of 25%, failing which, the total amount of penalty becomes payable. This option was not given in the instant case and, therefore, to that extent the order in original imposing penalty is in violation of the first proviso to Section 11AC of the Act. - duty had already been paid before the issuance of show cause notice. The appellant was therefore entitled to pay 25% penalty only. - Decided in favour of assessee. Issues:1. Entitlement to first and second proviso to Section 11AC of the Central Excise Act, 1944 regarding the payment of penalty.2. Imposition of penalty equal to the duty amount.3. Clarification on the options available to the assessee under Section 11AC of the Act.4. Compliance with the provisions of the first and second proviso to Section 11AC of the Act in the adjudication order.5. Correct quantification of penalty in accordance with the provisions of Section 11AC of the Act.Entitlement to First and Second Proviso to Section 11AC:The appeal questioned whether the appellant was entitled to the first and second proviso to Section 11AC of the Central Excise Act, 1944, concerning the payment of a penalty equal to 25% of the duty amount. The Court referred to previous decisions and emphasized that the penalty should be reduced to 25% of the duty amount if the duty and interest are paid within the specified period. It was noted that the duty had been paid before the issuance of the show cause notice, entitling the appellant to pay only 25% of the penalty amount.Imposition of Penalty Equal to Duty Amount:The order in original imposed a penalty equal to the duty amount, which was deemed incorrect as it did not align with the provisions of the first proviso to Section 11AC of the Act. The Court highlighted that the penalty should have been quantified in accordance with the first and second proviso to Section 11AC, providing an incentive for the assessee to pay the duty and interest within the stipulated period to avail the reduced penalty rate of 25%.Clarification on Options Available to Assessee:The Central Board of Excise and Customs clarified that the proviso to Section 11AC aimed to expedite the recovery of disputed amounts by offering an incentive to the assessee. The Board emphasized that the adjudication order should explicitly mention the options available to the assessee under Section 11AC, as ruled by various High Courts in different cases, to ensure transparency and compliance with the law.Compliance with Provisions of First and Second Proviso to Section 11AC:The Court reiterated that the adjudicating authority must mention the provisions of the first and second proviso to Section 11AC in the order passed when imposing a penalty under Section 11AC. Failure to do so would result in a violation of the law, as highlighted in previous judgments by different High Courts, emphasizing the mandatory nature of mentioning these provisions in the order.Correct Quantification of Penalty:The Court emphasized that the quantification of the penalty should be in accordance with the first proviso to Section 11AC, ensuring that the penalty does not exceed 25% of the duty amount if paid within the specified period. In this case, since the duty had already been paid before the show cause notice, the appellant was entitled to pay only 25% of the duty as a penalty. Consequently, the order imposing 100% penalty was deemed incorrect, and the appellant was directed to pay only 25% of the duty amount as penalty. The appeal was allowed, and the order was modified accordingly.