AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2015 (10) TMI 374
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.... of the show cause notices the petitioners preferred an application under Section 32E of the Central Excise Act (hereinafter referred to as the "Act") before the Settlement Commission praying for the settlement of the dispute. The application for settlement of the case was processed and the Commission passed an order holding that the conditions prescribed under the Act were fulfilled and, accordingly, admitted the application to be processed under Section 32 F of the Act. The Settlement Commission after taking into the facts and circumstances of the case passed an order dated 28.2.2008 holding that petitioner No.1 was liable to pay excise duty to the tune of Rs. 92,22,581/- and petitioner No.2 was liable to pay duty amounting to Rs. 18,52,978/- which was required to be paid within 15 days from the date of receipt of the order. On the question of interest, the Commission held that the case being one of clandestine removal, petitioner Nos.1 and 2 were liable to pay interest on the delayed payment of duty as per the prescribed rate under Section 11AB of the Act. The Department was directed to calculate interest which was to be paid by the petitioner within 15 days from the receipt of ....
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.... said amount was deposited on 9.2.2009. The petitioners thereafter filed an application dated 2.7.2009 praying that the excess amount deposited by way of penalty should be refunded in view of the proviso to Section 11AC of the Act. This application remained pending and the present writ petition was filed praying for the quashing of the order dated 28.2.2008 and the corrigendum dated 11.9.2008 passed by the Settlement Commission in so far as it denied the benefit of proviso to Section 11-AC of the Act and further prayed for a writ of mandamus commanding the respondents to refund the excess amount of 75% deposited towards penalty. 5. In this back drop, we have heard Sri Pankaj Bhatia along with Sri Gopal Verma, the learned counsel for the petitioner and Sri Ashok Singh, the learned counsel for the respondents. 6. The learned counsel contended that the Settlement Commission has to pass an order determining the quantum of penalty which has to be in accordance with the provisions of the Act and has no power to settle the case "dehors" the provisions of the Act, which are applicable to regular assessment orders. The learned counsel contended that the scheme of settlement, as contai....
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....r reject the application. If the application is processed, the Commission after examining the record and the report of the Commissioner and, after examining such other evidence, would pass an order providing the terms of settlement including any demand by way of duty, penalty or interest and the manner in which such sums would be paid. In the event, the duty interest, penalty etc. is not paid within the stipulated period, interest on the amount quantified by the Commission becomes payable under Section 32-F(9) of the Act. 9. Section 32-I of the Act provides the powers and procedure of the Settlement Commission. For facility, the said provision is extracted hereunder: "Powers and procedure of Settlement Commission:- (1) In addition to the powers conferred on the Settlement Commission under this Chapter, it shall have all the powers which are vested in a Central Excise Officer under this Act or the rules made thereunder. (2) Where an application made under section 32E has been allowed to be proceeded with under section 32F, the Settlement Commission shall, until an order is passed under sub-section [(5)] of section 32F, have, subject to the provisions of sub-sect....
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....s paid within thirty days from the date of communication of the order of the Central Excise Officer determining such duty, the amount of penalty liable to be paid by such person under this section be twenty-five per cent. of the duty so determined : Provided further that the benefit of reduced penalty under the first proviso shall be available if the amount of penalty so determined has also been paid within the period of thirty days referred to in that proviso : ................." 12. A perusal of the aforesaid provision indicates that where duty is determined under Section 11 A(2) of the Act and interest payable under Section 11 AB of the Act is paid within 30 days from the date of communication of the order of the Central Excise Officer determining such duty, the amount of penalty liable to be paid would be 25% of the duty so determined. The second proviso further provides that the benefit of reduced penalty under the first proviso would be available if the amount of penalty so determined has also been paid within the aforesaid period of 30 days. 13. It was urged by the learned counsel for the Department that the provisions of Section 11AC of the Act is no....
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....ers under Section 32F of the Act is vested with the powers of the Central Excise Officer, who is empowered to determine the duty and the interest payable on it. Once such duty is determined under Section 11A(2) and interest is determined under Section 11AB of the Act, the first proviso to Section 11AC comes into operation by law, namely, that where the assessee pays the amount of duty and interest within the stipulated period of 30 days from the date of communication of the order determining such duty, in which case the amount of penalty is liable to be paid by the assessee would be 25% of the duty so determined. This provision is for the benefit of the assessee, namely, that if the assessee pays the duty and interest demanded within 30 days of the communication of the order, in that event, the assessee would be liable to pay 25% of the duty amount by way of penalty otherwise he would be liable to pay 100% of the duty amount by way of penalty. 17. In K.P. Pouches (P) Ltd. vs. Union of India, 2008 (228) E.L.T. 31, the entire duty amount was paid well before the show cause notice. The adjudicating authority while determining the duty directed the assessee to pay 100 of the duty am....
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....t is an incentive given to the assessee that if he pays the duty amount along with interest, the penalty is reduced to 25% of the duty. This provision is beneficial to the department as well as the assessee as rightly pointed out by Delhi High Court and therefore, the assessee should be made aware of the option available to him. 3. In view of the points as discussed above, Board has decided that in all the cases, wherein penalty under section 11AC of the Act is imposed, the provisions contained in first and second proviso to section 11AC should be mandatorily mentioned in the Order-in-Original itself by the adjudicating authority. 4. The field formation may be suitably informed . Yours faithfully , ( Rahul Nangare ) Under Secretary to the Government of India" 18. The Central Board of Excise and Customs clarified that the proviso to Section 11AC was specifically inserted to ensure speedy recovery of the disputed amount and consequently an incentive was given to the assessee that, if he pays the duty and interest within the stipulated period, then penalty was reduced to 25% of the duty. The Board clarified that the said proviso was beneficial not only fo....
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.... waive the penalty, but, if it does not do so and imposes penalty, it can only do so in consonance with the provisions of the Act. The Commission cannot pass an order of penalty which over rides the provision of Section 11AC of the Act. 25. We also find that the Commission while issuing the corrigendum, directed the assessee to pay the amount within 15 days from the date of communication of the order. In our view, the period of 30 days, as specified in Section 11AC of the Act, cannot be reduced by the Commission. The mandatory provision contemplated under the proviso to Section 11AC of the Act is that a reasonable time is given to ensure that the amount is paid. Reducing the period would not provide that incentive to the assessee to avail this benefit by making the payment within the reduced period. The period mentioned in the proviso is a mandatory provision, which cannot be reduced by the Commission. 26. We also find that a cash of Rs. 58,50,650/- was seized at the time of search and before issuance of the show cause notice. Substantial amount was paid which covers the duty so determined. In any case, if it does not cover the duty imposed upon petitioner Nos.1 and 2, it def....