2017 (7) TMI 637 - AT - Central Excise

Supreme Court: Reduced penalties under Section 11AC can be applied at appellate stage

The Supreme Court clarified that the reduced penalty under Section 11AC of the Central Excise Act could be applied at the appellate stage if not specified ... Quantum of penalty - case of Revenue is that since the reduced amount of penalty of 25% was not deposited within 30 days from the date of receipt of the adjudication order, the benefit of quantum of reduced penalty provided under Section 11AC ibid should not be available to the appellant and the appellant is required to pay the entire amount of penalty confirmed in the adjudication order - Held that: - there were various judicial pronouncements by this Tribunal as well as the Hon’ble High Courts, ruling that the deposit of the reduced amount of penalty of 25% should be given by the adjudicating authority in the order of adjudication - option for depositing the reduced quantum of penalty by the adjudicating authority has not been provided in the adjudication order. The law is well settled that in absence of the option given by the adjudicating authority to pay reduced amount of penalty of 25%, the same can be extended by the Tribunal at appellate stage - since the adjudicating authority had not given the option to the appellant No.1 to deposit the entire duty alongwith interest and 25% of penalty in the order dated 17.12.2008 and the appellant had suo moto deposited such amount at the time of filing the appeal before the Commissioner (Appeals), the benefit of the reduced amount of penalty as per the judgment dated 25.11.2014 of Hon’ble Apex Court can be extended at the appellate state. Appeal allowed - decided in favor of appellant. Issues:1. Interpretation of Section 11AC of the Central Excise Act, 1944 regarding the deposit of reduced penalty.2. Applicability of reduced penalty provision to co-appellants.3. Imposition of penalties on co-appellants.Analysis:1. The case involved three appeals filed by M/s. Orien Industries Ltd., a manufacturer of motor vehicle parts, and its directors. The Central Excise Department issued show cause notices proposing duty demand and penalties. The adjudication order confirmed duty demand, interest, and penalties. The appellants deposited a portion of the penalty before filing the appeal, challenging the order. The main issue was the interpretation of Section 11AC regarding the deposit of reduced penalty. The appellant argued that the reduced penalty should apply due to the deposit made before the appeal, citing various judgments. The Revenue contended that full penalty was required since the reduced amount was not deposited within 30 days. The Tribunal examined the statutory provisions and judicial precedents, noting conflicting views. The Supreme Court's judgment clarified that the reduced penalty could be extended at the appellate stage if not provided in the adjudication order. Consequently, the Tribunal extended the benefit of reduced penalty to the appellants.2. Regarding the co-appellants, the Tribunal considered the circumstances and the reduced penalty deposited by the main manufacturer. It held that personal penalties on the co-appellants could be reduced in the interest of justice. Therefore, the penalties on the co-appellants were reduced accordingly.3. In conclusion, the Tribunal set aside the imposition of 100% penalty on the main appellant and considered the amount deposited as appropriate under Section 11AC. It also reduced the penalties on the co-appellants in the interest of justice. The appeals were disposed of based on the above considerations.