2006 (7) TMI 29 - HC - Central Excise

Court upholds penalties for non-compliance with excise duty regulations, rejects early payment defense.

SAI MACHINE TOOLS PVT. LTD. Versus COMMR. OF C. EX. AND CUSTOMS, INDORE

The High Court upheld the Tribunal's decision to impose penalties under Section 11AC and interest under Section 11AB, emphasizing the appellant's ... Central Excise – Assessee availed SSI exemption – Delayed payment of duty after crossing exemption limit and enjoy the exemption facility though not eligible – Penalty reduced on the ground that duty paid prior to issuance of show cause notice Issues:1. Appeal under Section 35G of Central Excise Act, 1944 against Tribunal's order.2. Exemption limit exceeded leading to duty payment and penalties.3. Dispute over penalty imposition under Section 11AC and interest under Section 11AB.4. Tribunal's decision to reduce penalty to Rs. 50,000 upheld.Analysis:1. The appeal was filed under Section 35G of the Central Excise Act, 1944 against the Tribunal's order arising from a Commissioner of Appeals' decision, where penalties were imposed for exceeding the exemption limit and non-payment of excise duty.2. The appellant, engaged in manufacturing and sale of excisable goods, exceeded the exemption limit during the financial year 1997-98, resulting in the imposition of excise duty and penalties. The authorities issued a show cause notice proposing duty payment, penalties, and interest. The appellant contested, citing the duty payment prior to the notice issuance.3. The Tribunal, while upholding the penalty under Section 11AC, reduced it from the original amount to Rs. 50,000. The Tribunal emphasized that the duty payment before the notice did not absolve the appellant from penalty liability, as the payment was considered mandatory under the Act. The Tribunal's decision was based on the clear language of Section 11AC, holding the appellant liable for penalty and interest under Section 11AB.4. The Tribunal's decision was supported by the High Court, which found no fault in upholding the penalty and interest imposition. The Court emphasized that the appellant, being aware of the duty payment limit, could not claim ignorance of the law. The Court concurred with the Tribunal's reasoning and dismissed the appeal, noting that the penalty reduction was a substantial relief granted to the appellant.In conclusion, the High Court upheld the Tribunal's decision to impose penalties under Section 11AC and interest under Section 11AB, emphasizing the appellant's obligation to comply with excise duty payment regulations and rejecting the argument that early duty payment absolved them from penalty liability. The Court found the penalty reduction to Rs. 50,000 appropriate, considering the circumstances of the case.