Payment of Penalty

[Pradeep Jain]

Dear Sir,

 We are member of Large Tax payer  Unit (LTU) .We have paid differential Excise duty along with interest. Now department has been insisting to pay penalty  also at the rate of 1 percent of amount of diff. duty under section 11AC to avoid the SCN. According to me , no scn is issued by the department if  differential EC is paid along with interest  . Please advise. Regds Pradeep

[Madhukar N Hiregange]

True. Also paying 1 percent penalty accepts that there is fraud, suppression ect.

[Mahir S]

Department insistence appears to be true if the differential excise duty is due to any reason pertaining to fraud, collusion, any wilful mis-statement, suppression of fact or contravention of any provision with intention relating to evasion of excise duty.

The contention made by the departmental officer is correct as in the present case, as the same is duly supported under the rule.

Interestingly, the reasons for payment of differential duty is not mentioned.

 

[S RAMAN]

When the Service Tax is paid with interest no penalty is payable. You can refer a judgement appeared in the same Tax Management India and hence, if demanded prefer an appeal.

AI Summary

Penalty under section 11AC is demandable where differential duty stems from fraud or suppression; payment with interest can avoid penalty. The department can demand a penalty under section 11AC if differential excise duty results from fraud, suppression or willful misstatement, and payment of the penalty may amount to an admission of culpability. Conversely, payment of differential duty with interest has been treated in some precedents as obviating penalty; where penalty is claimed despite payment with interest, an appeal is advised. The factual reasons for the differential are determinative.