Penalties under Rule 173Q & Section 11AC can be imposed concurrently. CESTAT decision quashed.

The court held that penalties under both Rule 173Q and Section 11AC can be imposed concurrently. It found the CESTAT erred in setting aside the penalty solely based on composite levy and remanded the matter for redetermination of penalties under the respective provisions. The appeal was allowed, the CESTAT's decision was quashed, and the question of law was answered in favor of the Revenue.

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Issues Involved:
1. Whether the CESTAT is empowered not to impose penalty under Rule 173Q of Central Excise Rules, 1944 read with Section 11AC of Central Excise Act, 1944 on the assessee who evaded Central Excise Duty by suppression of facts and in contravention of Rules under Central Excise Law.

Issue-wise Detailed Analysis:

1. Empowerment of CESTAT to Not Impose Penalty:

Facts:
The respondent assessee, engaged in manufacturing man-made fabrics, was found to have illicitly removed goods and possessed excess stock that did not tally with records. A show cause notice was issued, and the Commissioner adjudicated, imposing penalties and demanding duty. The CESTAT upheld the duty demand, confiscation, and interest liability but set aside the penalty imposed under Rule 173Q(1) of the Central Excise Rules, 1944 read with Section 11AC of the Central Excise Act, 1944.

Arguments by Revenue:
The Revenue argued that the CESTAT erred in quashing the penalty as the assessee evaded duty by suppressing facts. They contended that penalties under both Rule 173Q and Section 11AC are distinct and can be imposed concurrently. The CESTAT's decision to set aside the penalty on the ground of composite levy was challenged, emphasizing that both provisions serve different purposes and fields.

Arguments by Respondent:
The respondent supported the CESTAT's decision, arguing that composite penalties under Rule 173Q and Section 11AC are impermissible. They relied on precedents to support the claim that such composite penalties should be set aside.

Court's Analysis:
The court examined the provisions of Section 11AC and Rule 173Q, noting that both operate in different fields. Section 11AC imposes penalties for short-levy or non-levy of duty due to fraud or suppression of facts, while Rule 173Q targets contraventions by manufacturers, producers, or dealers. The court emphasized that penalties under both provisions can be imposed concurrently if applicable.

The court found that the CESTAT erred in setting aside the penalty solely on the ground of composite levy. It highlighted that the proper remedy would be to remand the matter for redetermination of penalties under the respective provisions, rather than setting aside the penalty entirely, which would unjustly benefit the wrongdoer.

Conclusion:
The court concluded that the CESTAT's decision to quash the penalty was incorrect. It held that penalties under both Rule 173Q and Section 11AC are imposable concurrently, and the matter should be remanded to the Adjudicating Authority for redetermination of the penalty amount under the respective provisions. The appeal was allowed, and the CESTAT's order setting aside the penalty was quashed. The question of law was answered in favor of the Revenue.

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