Tribunal upholds penalty reduction despite payment, rules penalties warranted for non-payment of Additional Excise Duty

The Tribunal upheld the reduction of penalty to 25% of the duty imposed on an assessee for non-payment of Additional Excise Duty (AED) despite the assessee paying the disputed duty and interest before the show cause notice was issued. The Tribunal found penalties warranted under Rule 25 of Central Excise Rules 2002 read with section 11AC of the Central Excise Act 1994 due to non-payment of AED discovered during an investigation. Both Revenue and Assessee appeals against the penalty were dismissed, affirming the Tribunal's decision.

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Issues:
- Dispute over liability to pay Additional Excise Duty (AED) under specific notifications
- Imposition and reduction of penalty
- Appeal by both Revenue and Assessee against penalty and its reduction

Analysis:
The case involved a dispute regarding the liability of an assessee manufacturing un-branded chewing tobacco to pay Additional Excise Duty (AED) under notification no. 06/2005-CE dated 01.06.2005 for the period from October 2006 to July 2008 while availing SSI exemption under notification no. 08/2003-CE dated 01.03.2003. The Revenue contended that the assessee deliberately did not pay the AED, resulting in a demand for duty, interest, and a proposed penalty under rule 25 read with section 11AC of the Central Excise Act 1944. The assessee, however, paid the disputed duty along with interest before the show cause notice (SCN) was issued. The adjudicating authority confirmed the demand and imposed a penalty, which was later reduced to 25% by the Ld. Commissioner (A) considering the payment made prior to the SCN. Both parties appealed against the penalty, with the Revenue arguing against the reduction and the assessee contesting the imposition.

During the proceedings, it was revealed that the assessee had registered themselves, but the dispute pertained to the period before registration, which was discovered by the Revenue during an investigation. Despite the assessee paying the entire disputed amount of duty along with interest, the Tribunal held that penalties were warranted under Rule 25 of Central Excise Rules 2002 read with section 11AC of the Central Excise Act 1994 due to non-payment of AED coming to light during the investigation. However, considering the payment made, the Tribunal upheld the reduction of penalty to 25% of the duty. Consequently, the Tribunal found no fault in the impugned order and dismissed the appeals filed by both the Revenue and the Assessee.

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