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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: Whether, under Section 11AC of the Central Excise Act, 1944, the authority has any discretion to impose a penalty lesser than the duty evaded.
Analysis: The provision was construed as prescribing a fixed quantum of penalty equal to the duty determined where non-levy, short-levy, short-payment, or erroneous refund is occasioned by fraud, collusion, wilful misstatement, suppression of facts, or contravention with intent to evade duty. The proviso was read as granting limited relief only where the duty and interest are paid within the stipulated period, in which event the penalty is reduced to 25 per cent of the duty so determined. The scheme of Sections 11A, 11AA, 11AB, and 11AC was treated as supporting a strict liability framework for evasion cases, and the absence of any prescribed upper or lower limit was taken to exclude discretionary reduction below the statutory quantum.
Conclusion: There is no discretion under Section 11AC to impose a penalty less than the statutory amount, and where the proviso applies, the penalty is confined to 25 per cent of the duty evaded.
Final Conclusion: The penalty imposed below the statutory quantum was unsustainable, and the assessee was held liable to the penalty amount prescribed by Section 11AC.
Ratio Decidendi: Where Section 11AC is attracted, penalty is mandatory and must follow the statutory quantum, with only the proviso permitting the specified reduced rate on timely payment of duty and interest.
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