2010 (3) TMI 501 - HC - Central Excise

High Court upholds Tribunal's waiver of penalty under Section 11AC of Central Excise Act, 1944.

The High Court dismissed the appeal against the Customs, Excise & Service Tax Appellate Tribunal's order, which had waived the penalty under Section ... Penalty - Whether on the facts and in the circumstances of the case and in law the Hon’ble CESTAT was justified in waiving the penalty equivalent to the amount of duty already paid of Rs. 79,389/- under Section 11AC of the Central Excise Act, 1944 when the said Act for its imposition prescribed mandatory penalty equal to the amount of duty outstanding, even in case where the payment of duty has already been made prior to issue of show cause notice? Held that – finding of facts by both courts below that provisions of section 11AC of Central Excise Act, 1944 not attracted not illegal or perverse. Section 11AC not attracted. Issues:1. Appeal against the order of the Customs, Excise & Service Tax Appellate Tribunal, Mumbai.2. Question of law regarding waiver of penalty under Section 11AC of the Central Excise Act, 1944.3. Finding of facts by the First Appellate Authority.4. Tribunal's affirmation of the findings.5. Interpretation of Section 11(AC) of the Central Excise Act, 1944.Appeal Against Tribunal's Order:The High Court heard the appeal against the order dated 25-7-2005 passed by the Customs, Excise & Service Tax Appellate Tribunal, Mumbai. The appeal was admitted by the High Court to consider a question of law regarding the waiver of penalty equivalent to the amount of duty already paid under Section 11AC of the Central Excise Act, 1944.Question of Law - Waiver of Penalty:The question raised in the appeal was whether the Tribunal was justified in waiving the penalty equivalent to the amount of duty already paid under Section 11AC of the Central Excise Act, 1944. The Appellate Authority and the Tribunal found that penalty was not liable to be imposed as the duty was paid prior to the show cause notice, and there was no mala fide intent to evade duty. The Courts held that Section 11AC was not attracted in the case, as there was no suppression of information, fraud, or collusion established from the evidence on record.Finding of Facts by Appellate Authority:The First Appellate Authority considered the facts, submissions, and relevant laws. It noted that the duty was discharged immediately on audit objection before the show cause notice, and the Tribunal's decisions in similar cases supported the appellant's position. The Authority found no mala fide intent to evade duty and no irregularities in availment of Modvat credit. It concluded that penalty was not applicable in the absence of evidence of suppression of information or fraud.Tribunal's Affirmation:The Tribunal affirmed the findings of the First Appellate Authority, stating that no penalty should be imposed as the duty was paid before the show cause notice, and the goods on which Modvat credit was taken were still in the factory pending an insurance claim. It found no mala fide on the part of the appellant and rejected the revenue's appeal against non-imposition of penalty.Interpretation of Section 11(AC):The High Court held that both the lower Courts were justified in their findings that Section 11(AC) of the Central Excise Act, 1944 was not attracted in the case. It concluded that the provision was not applicable as there was no evidence of mala fide intent or suppression of information. Therefore, the appeal was dismissed in favor of the respondent-assessee, with no order as to costs.This detailed analysis of the judgment provides a comprehensive understanding of the issues involved and the reasoning behind the decision of the High Court in this case.