TaxTMI 
TaxTMI 
2012 (6) TMI 697
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....penalty at 25% shall be available only if the duty determined under Section 11A(2), interest payable thereon under Section 11AB and penalty at 25% of the duty determined under Section 11A(2) has been paid within thirty days from the date of communication of the order of the Central Excise Officer determining duty payable under Section 11A(2) of the 1944 Act ?" 2) Since the above question has been raised in several appeals, we requested Mr. M.H. Patil, Advocate to assist the Court as Amicus Curiae. Accordingly, we have heard Mr. Jetly, counsel for the appellant-revenue, Mr. Dighe, counsel for the respondent-assessee and Mr. M.H. Patil as Amicus Curiae. 3) The assessee is a manufacture of excisable goods. The assessee inter alia during the year 2000 had availed Modvat credit of central excise duty paid on inputs used in the manufacture of the final products under Rule 57AB of the Central Excise Rules, 1944 ['1944 Rules' for short]. 4) In the year 2002, it was noticed by the departmental audit party that during November-December, 2000 the assessee had actually availed modvat credit amounting to Rs.31,53,034/- as against the admissible credit amounting to Rs.3,40,861/-. Thus, ....
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....ion 11AB of the 1944 Act. As the excess credit was availed with an intention to evade duty, the adjudicating authority held that Section 11AC was attracted and accordingly levied mandatory penalty of Rs.28,12,173/- (equal to the duty confirmed) under Section 11AC of the 1944 Act. 9) The assessee filed an appeal before the CESTAT to challenge the penalty imposed under Section 11AC of the Act. The CESTAT by its order dated 19th May, 2011 held that the finding recorded by the Commissioner of Central Excise to the effect that the excess credit was taken by the assessee with an intention to evade the duty having not been challenged, the decision of the Commissioner in holding that Section 11AC of the 1944 Act is not attracted in the present case cannot be faulted. However, the CESTAT following the decision of the Delhi High court in the case of K.P. Pouches (P) Ltd. V/s. Union of India reported in (2008) 228 E.L.T. 31 (Del) held that since the option for pay the reduced penalty under the proviso to Section 11AC has not been given in the adjudication order dated 12th November, 2003, the benefit of reduced penalty under Section 11AC of the Act cannot be denied to the assessee. Accordin....
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..... Patil, appearing as Amicus Curiae and Mr. Dighe, learned counsel for the assessee submitted that although this Court in the case of Viraj Alloys Ltd. (supra) has held that the benefit of paying the reduced penalty is available only if the duty with interest and reduced penalty is paid within 30 days from the date of receipt of the quantified demand based on the order in original, the said decision is based on the concession made by the counsel for the assessee therein and, therefore, the said decision cannot be said to lay down any binding precedent. In any event, it is submitted, that as per the aforesaid decision it was obligatory on the part of the adjudicating authority to make it explicitly clear in the operative part of the order that the quantified duty liability along with interest under Section 11AB, if paid within 30 days from the date of receipt of quantified demand, then, penalty payable would be 25% of the duty liability confirmed in the order passed under Section 11A(2). In the present case, the adjudication order passed on 12th November, 2003 does not comply with the aforesaid direction of this Court and, therefore, no fault can be found with the decision of the CE....
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.... penalty so determined within a period of 30 days to avail the benefit of reduced penalty. On plain reading it makes clear that it is the responsibility of the adjudicating officer to (i) determine 100% penalty under Section 11AC and mention the same in the order (ii) determine the availability of 25% penalty to the noticee for 30 days in the event the payment as contemplated under first proviso and 25% penalty, as determined, is paid within 30 days. In the absence of the second stage determination of the 25% penalty for 30 days, the only determined penalty would be 100% penalty under Section 11AC without giving benefit of mandatory proviso to Section 11AC. In which case, based on the plain reading of the second proviso, it will become necessary for the noticee to pay 100% determined penalty to avail the benefit of reduced penalty of 25% (which is not determined in the order). This could not be the legislature's intent as it will give not only absurd result but also give undue hardship when the noticee desires to make the payment. In view of what is stated above, it is submitted that it is mandatory on the part of the adjudicating authority to determine the 2 stage penalty as state....
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....where the duty determined to be payable is reduced or increased by the Commissioner(Appeals), the Appellate Tribunal or, as the case may be, the court, then, for the purposes of this section, the duty as reduced or increased, as the case may be, shall be taken into account." "Section 11AC as amended by the Finance Act, 2000 with effect from 12 th May, 2000. Section 11AC - Penalty for short-levy or non-levy of duty in certain cases - Where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reasons of fraud, collusion or any wilful misstatement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intention to evade payment of duty, the person who is liable to pay duty as determined under sub-section (2) of Section 11A, shall also be liable to pay a penalty equal to the duty so determined : Provided that where such duty as determined under subsection (2) of section 11A, and the interest payable thereon under section 11AB, is paid within thirty days from the date of communication of the order of the Central Excise Officer determining such duty, the amoun....
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....to evade payment of duty, the person who is liable to pay duty as determined under sub-section (10) of section 11A shall also be liable to pay a penalty equal to the duty so determined. (b) where details of any transaction available in the specified records, reveal that any duty of excise has not been levied or paid or short-levied or short-paid or erroneously refunded as referred to in sub-section (5) of section 11A, the person who is liable to pay duty as determined under sub-section (10) of section 11A shall also be liable to pay a penalty equal to fifty per cent of the duty so determined. (c) where any duty as determined under sub-section (10) of section 11A and the interest payable thereon under section 11AA in respect of transactions referred to in clause (b) is paid within thirty days of the date of communication of order of the Central Excise Officer who has determined such duty, the amount of penalty liable to be paid by such person shall be twenty-five per cent of the duty so determined. (d) where the appellate authority or tribunal or court modifies the amount of duty of excise determined....
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....ELT 3 (SC). The dictum laid down by the Apex Court in the aforesaid cases is that once it is held that Section 11AC is attracted, then, the concerned authority would not have any discretion and penalty must be imposed equal to the duty determined under Section 11A(2) of the 1944 Act. In other words, in cases where Section 11AC applies, the penalty equal to 100% of the duty determined under Section 11A(2) has to be mandatorily imposed and there is no discretion left with the adjudicating authority to impose penalty, less than 100% of the duty confirmed under Section 11A(2) of the 1944 Act. 20) The first proviso inserted to Section 11AC with effect from 12/5/2000, however, provides that where the duty determined under Section 11A(2) and interest payable thereon under Section 11AB is paid within thirty days from the date of communication of the order of the Central Excise Officer determining such duty, then the amount of penalty liable to be paid by such person under Section 11AC shall be 25% of the duty so determined. The second proviso inserted to Section 11AC along with the first proviso with effect from 12/5/2000 further provides that the benefit of paying the reduced penalty u....
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....in the time stipulated under the section. If the assessee fails to fulfill the conditions set out in the first and the second proviso to Section 11AC within the time stipulated therein, then, the incentive is lost and the assessee is required to pay penalty at 100%. Therefore, in the absence of any obligation cast upon the Central Excise Officer under Section 11AC to determine penalty at 25%, the argument that if the Central Excise Officer fails to determine 25% penalty, the appellate authority can determine 25% penalty and permit the assessee to pay penalty within thirty days from the date of communication of the order passed by the appellate authority cannot be accepted. 23) The fact that this Court in the case of Viraj Alloys Limited (supra) as also various High Courts and even the CBDT have directed the adjudicating authorities to make it explicitly clear in the operative part of the adjudication order regarding the availability of paying 25% penalty in the circumstances set out in the first and the second proviso to Section 11AC, does not mean that the statue casts such an obligation on the adjudicating authorities. Therefore, if the adjudicating authority fails to make a r....
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.... 26) By comparing Section 11AB with Section 11A(2B) and (2C) and also by referring to Section 11AC as substituted with effect from 8th April, 2011, it was contended by the counsel for the assessee that it was never the intention of the legislature to levy 100% penalty under Section 11AC. We see no merit in the above contention because, firstly sub-section 2B and 2C to Section 11A are applicable to cases not involving fraud, collusion, suppression of facts etc, whereas Section 11AC applies to cases where there is intention to evade payment of duty on account of fraud, collusion or any willful misstatement or suppression of facts etc. Secondly, to attract Section 11AC criminal intent or mens rea is a necessary constituent, where as, under Section 11A, the criminal intent or mens rea is not the necessary constituent. Therefore, the provisions of Section 11AC cannot be interpreted with reference to the provisions contained in Section 11A of the 1944 Act. Similarly, the Section 11AC as substituted with effect from 8th April 2011 does not support the case of the assessee because, even under those provisions the penalty imposable under Section 11AC is the penalty equal to the duty determ....