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Issues: (i) Whether penalty under Section 11AC was liable to be imposed without granting the assessee the statutory option to pay duty and reduced penalty within the prescribed period; (ii) Whether interest was leviable under the unamended Section 11AB for the period after its insertion on 28-9-1996 and before 11-5-2001.
Issue (i): Whether penalty under Section 11AC was liable to be imposed without granting the assessee the statutory option to pay duty and reduced penalty within the prescribed period.
Analysis: The penalty provision was treated as mandatory once the ingredients of fraud, suppression or intent to evade were present, but the first proviso to Section 11AC created a statutory option of reduced penalty if duty and interest were paid within thirty days of communication of the adjudication order. The adjudicating authority had not expressly communicated that option in the order, and the matter required reconsideration in light of the judicial view that the option must be made clear in the order itself.
Conclusion: The penalty issue was remanded for fresh adjudication with a direction to grant the assessee the statutory option contemplated by the proviso to Section 11AC.
Issue (ii): Whether interest was leviable under the unamended Section 11AB for the period after its insertion on 28-9-1996 and before 11-5-2001.
Analysis: The Tribunal had proceeded on the basis of the amended sub-section (2) of Section 11AB, whereas the dispute related to the earlier regime under which Section 11AB had been inserted by the Finance (No. 2) Act, 1996. For the relevant period, the unamended provision remained applicable, and the question of interest had to be examined with reference to that statutory framework.
Conclusion: The interest issue was also remanded for fresh decision under the unamended Section 11AB.
Final Conclusion: Both appeals were disposed of by setting aside the impugned determinations on penalty and interest and sending the matter back for de novo consideration on the relevant statutory options and the correct interest provision.
Ratio Decidendi: Where the statute grants a reduced-penalty option on timely payment, the adjudication order must clearly convey that option, and liability for interest must be determined under the provision applicable to the relevant period, not an inapplicable amended regime.
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