2019 (5) TMI 653 - AT - Central Excise

Appellant's Penalty Reduced to 25% of Actual Duty in Tax Dispute

The tribunal held that the appellant is liable to pay only 25% of the actual duty as a penalty, amounting to Rs. 4,66,692/- (25% of Rs. 18,66,768/-). ... Penalty under Section 11AC - Wilful suppression with intent to evade payment of duty - Requantification of duty on remand - Option to pay 25% penalty where duty and interest paid within thirty days of communication of order - Modification of penalty in consequence of appellate variation of dutyPenalty under Section 11AC - Wilful suppression with intent to evade payment of duty - Requantification of duty on remand - Option to pay 25% penalty where duty and interest paid within thirty days of communication of order - Quantum of penalty to be imposed after requantification of duty on remand where there is a finding of wilful suppression and the assessee had deposited duty and interest prior to issuance of show-cause notice. - HELD THAT: - The Tribunal earlier remanded the matter for requantification of duty and directed redetermination of penalty not to exceed the amount fixed by the Commissioner(Appeals). On requantification the duty was reduced to Rs. 18,66,768/-. The adjudicating authority had imposed a penalty equivalent to the earlier, larger figure; the appellant had deposited amounts under protest during investigation before issuance of show-cause notice. The appellate findings and the statutory scheme of Section 11AC were applied: where duty as determined under Section 11A and interest under Section 11AA is paid within the time-frame prescribed, the statutory option results in a reduced penalty of 25% of the duty so determined. The Tribunal's directions and the cited precedents establish that the option to pay reduced penalty is available measured from the operative appellate order where applicable. Applying these principles to the requantified duty, the Court held that the penalty must be computed as 25% of the duty finally determined on remand, and the excessive penalty imposed earlier must be set aside. The Court rejected the contention that prior authorities relied upon by the appellant were fully inapplicable; however, the determinative conclusion is that the statutory proviso limits the penalty to 25% of the duty as finally requantified where the conditions of payment are satisfied. [Paras 6, 7]Imposition of penalty of Rs. 16 lakhs set aside and penalty fixed at 25% of the requantified duty, i.e., 25% of Rs. 18,66,768/-, with the appeal partly allowed.Final Conclusion: The appeal is partly allowed: having regard to the Tribunal's remand and the requantified duty, the penalty imposed is reduced to 25% of the duty finally determined on remand. Issues Involved:1. Confiscation of goods and demand of duty along with interest and penalty.2. Quantum of penalty under Section 11AC of the Central Excise Act.3. Applicability of reduced penalty if duty and interest are paid before issuance of show-cause notice.4. Interpretation of Section 11AC and its proviso regarding penalty reduction.Detailed Analysis:1. Confiscation of Goods and Demand of Duty Along with Interest and Penalty:The appellants, a 100% EOU, became defunct and sold their plant without informing the Customs authorities or obtaining necessary permissions. They admitted to carrying out job work without prior permission and pre-deposited Rs. 30 lakhs. A show-cause notice was issued for confiscation of goods and demand of duty along with interest and penalty. The adjudicating authority confirmed the demand, which was upheld by the Commissioner(Appeals) with a reduced penalty. The appellants appealed to the CESTAT, which remanded the case for requantification of duty and penalty.2. Quantum of Penalty Under Section 11AC of the Central Excise Act:The CESTAT directed the adjudicating authority to requantify the duty and redetermine the penalty under Section 11AC, ensuring it did not exceed the amount determined by the Commissioner(Appeals). Upon requantification, the duty was reduced to Rs. 18,66,768/- from Rs. 32,34,540/-, and a penalty of Rs. 16 lakhs was imposed. The appellant contested this penalty before the Commissioner(Appeals), which was rejected, leading to the present appeal.3. Applicability of Reduced Penalty if Duty and Interest are Paid Before Issuance of Show-Cause Notice:The appellant argued that since they pre-deposited Rs. 30 lakhs, covering duty and interest, before the issuance of the show-cause notice, no penalty should be imposed. They cited several decisions supporting this view. However, the tribunal noted that the appellant's case involved suppression of facts with intent to evade duty, making the cited decisions inapplicable.4. Interpretation of Section 11AC and its Proviso Regarding Penalty Reduction:The tribunal examined Section 11AC, which stipulates that if duty and interest are paid within thirty days of the communication of the order, the penalty should be 25% of the duty determined. The tribunal referred to various judgments, including the Hon’ble Madras High Court's decision in AP Steels, which clarified that the option to pay a reduced penalty commences from the date of the appellate order.Conclusion:The tribunal concluded that the appellant is liable to pay only 25% of the actual duty as a penalty, amounting to Rs. 4,66,692/- (25% of Rs. 18,66,768/-). Therefore, the imposition of a Rs. 16 lakhs penalty was set aside, and the appeal was partly allowed.(Order was pronounced in Open Court on 07/05/2019)