2009 (12) TMI 489 - HC - Central Excise

High Court dismisses appeal on Section 11AC penalty, upholding Tribunal's decision.

The High Court dismissed the appeal, ruling that the penalty under Section 11AC of the Central Excise Act was not applicable as there was no evidence of ... Penalty – Transporter’s copy not available - penal clause would not be attracted to the facts of every case unless a categorical finding of fraud, collusion, willful mis-statement etc. with the intention to evade payment of duty have been recorded. In the absence of such a finding, the imposition of penalty is not automatic and cannot be levied Issues Involved:1. Whether the penalty limit under Section 11AC of the Central Excise Act, 1944 is maximum and authority has discretion to impose lesser penalty.2. Validity of duty demands and confiscation of goods.3. Justification of penalties imposed on respondent-assessee, M/s. Om Steel Industries, and M/s. Bhogal Sales Corporation.Detailed Analysis:1. Penalty Limit under Section 11AC of the Central Excise Act, 1944:The primary issue is whether the penalty limit under Section 11AC is maximum and whether the authority has discretion to impose a lesser penalty. The Tribunal reduced the penalty to Rs. 2,000/-, which was contested by the Revenue. The High Court referred to the case of Union of India v. Dharamendra Textile Processors, where the Supreme Court held that authorities do not have discretion to reduce the penalty, which must be equivalent to the amount of duty. However, the Court also cited Union of India v. Rajasthan Spinning and Weaving Mills, clarifying that mandatory penalty under Section 11AC is not applicable automatically to every case of non-payment or short payment of duty. The requirements of Section 11AC must be fulfilled, and it is punishment for deliberate deception with intent to evade duty. In this case, the High Court found no evidence of fraud, willful misstatement, collusion, or suppression of facts by the respondent-assessee, thus ruling that the penalty clause under Section 11AC was not applicable.2. Validity of Duty Demands and Confiscation of Goods:The respondent-assessee was engaged in manufacturing Cold Rolled Strips and Steel Tubes and availing Cenvat credit. The officers intercepted a tempo loaded with steel tubes and pipes, and found that the duty liability was not debited in the PLA despite being mentioned in the invoice. The respondent-assessee had cleared goods without debiting the duty leviable. The officers seized the goods and the tempo. The Joint Commissioner confirmed the demand of duty and confiscated the goods with an option for redemption fine. The Tribunal upheld the duty on steel tubes but found that duty on C.R. Strips was not sustainable as they were accounted for and utilized in the manufacture of the final product.3. Justification of Penalties Imposed:The Joint Commissioner imposed penalties on the respondent-assessee and other parties. The Commissioner (Appeals) deleted the penalties on M/s. Om Steel Industries and M/s. Bhogal Sales Corporation but upheld the penalty on the respondent-assessee. The Tribunal reduced the penalty on the respondent-assessee. The High Court found no evidence of fraud or intent to evade duty, thus ruling that the imposition of penalty under Section 11AC was not justified. The Court emphasized that penal provisions would not be attracted unless a categorical finding of fraud, collusion, or willful misstatement with intent to evade duty is recorded.Conclusion:The High Court dismissed the appeal, holding that in the absence of any finding of fraud, willful misstatement, collusion, or suppression of facts with the intention to evade payment of duty, the penalty under Section 11AC was not applicable. The Tribunal's decision to reduce the penalty was upheld, and the appeal by the Revenue was found to lack merit.