Appellant denied reduced penalty benefit due to non-compliance with proviso. Penalty applies to entire duty. Appeal dismissed.

The appellant was found not entitled to the benefit of reduced penalty of 25% under section 11AC due to non-compliance with the first proviso. The court held that the penalty should apply to the entire duty determined under section 11A(2) and not just the unpaid balance. Consequently, the appeal was dismissed, with both substantial questions of law decided against the appellant in favor of the respondent.

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Issues Involved:
1. Whether the appellant was entitled to the benefit of payment of only 25% of the penalty.
2. Whether an assessee is liable to pay penalty only to the extent of the balance unpaid amount of the duty determined under section 11A(2) of the Central Excise Act, 1944.

Issue-wise Detailed Analysis:

Re: Question No.1:

The imposition of duty is not contested by the appellant. The primary question is whether the appellant is liable to pay the entire penalty or only the penalty on the balance unpaid amount of the duty of excise. Despite the appellant's contention of paying Rs. 5,22,759/- on 04.07.2008 as per the respondent's instructions, the adjudicating authority confirmed the duty amounting to Rs. 6,00,247/- on 02.03.2010. The appellant deposited the balance duty of Rs. 77,498/- on 16.09.2010, beyond the 30-day period from the date of the original order.

Under section 11AC, the appellant was liable to pay the duty and a penalty equal to the duty determined. The first proviso of section 11AC allows a reduced penalty of 25% of the duty if the duty and interest are paid within 30 days from the communication of the order. The appellant paid the balance duty beyond this period, making the first proviso inapplicable.

The second proviso, as interpreted in the case of Commissioner of Central Excise, Rohtak vs. J.R. Fabrics (P) Ltd., 2009(238) E.L.T. 209 (P&H), does not assist the appellant due to non-compliance with the first proviso. Consequently, the appellant is not entitled to the benefit of reduced duty.

Thus, Question No.1 is answered in favor of the respondent and against the appellant.

Re: Question No.2:

This issue was not raised before the Tribunal but is considered as a substantial question of law by the High Court. The appellant argued that the penalty should only apply to the unpaid balance of the duty determined under section 11A(2), which in this case is Rs. 77,498/-.

Section 11A allows the Central Excise Officer to determine the amount of duty due after considering the representation by the person served with notice. Section 11AC stipulates that the penalty is equal to the duty determined under section 11A(2). The first proviso to section 11AC reduces the penalty to 25% of the duty if the duty and interest are paid within 30 days of the order's communication. The language of the first proviso indicates that the reduced penalty applies only if the entire duty and interest are paid within the stipulated period, not just a part.

The third proviso clarifies that the duty determined by the final order (whether by the Commissioner (Appeals), the Appellate Tribunal, or the Court) is to be considered for section 11AC purposes. This supports the view that the first proviso requires payment of the entire duty and interest for the reduced penalty benefit.

The first proviso provides an incentive for prompt payment of the entire duty and interest, ensuring efficient recovery for the Revenue. The incentive is not intended for partial payments, which would undermine the purpose of the provision.

Considering the legislative intent and the specific treatment of cases involving fraud, collusion, etc., the first proviso's concession is conditional on full payment within the stipulated period. Even if another interpretation is possible, the court is not inclined to favor the appellant, given the context of section 11AC involving fraud, collusion, etc.

Thus, Question No.2 is also answered against the appellant and in favor of the Revenue.

Conclusion:

In conclusion, the appeal is dismissed, with both substantial questions of law answered against the appellant and in favor of the respondent.

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