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2007 DIGILAW 482 (RAJ)

Union of India v. T. P. L. Industries Ltd.

2007-03-02

GOPAL KRISHAN VYAS, RAJESH BALIA

body2007
Judgment Rajesh Balia, J.-The following substantial question of law has been framed in this appeal for consideration : "Whether in the facts and circumstances of this case the Tribunal was right in setting aside the penalty imposable as equal to the amount of duty under Section 11-C of the Act, 1944 because the assessee had deposited the amount of duty on being detected by the Departmental Officers before issuance of the show cause notice?" 2. The facts necessary for the present case are that alongwith show cause notice for levy of duty which has not been paid notice for levy of penalty was also issued for committing breach of Rules 9(1), 52-A, 53, 173-F, 173-Q & 226 of Central Excise Rules read with Section 3 of the Additional Duties of Excise Act, 1957. Penalty was sought to be levied under Rules 9(2), 52-A, 173-Q and 226 of the Central Excise Rules read with Section 11-AC of the Central Excise Act for contravention of aforesaid provisions and ultimately finding that the duty was short levied a penalty under Rule 9(2) read with Rule 173-Q was imposed and also a penalty equivalent to the amount of tax levied was imposed with reference to Section 11-AC of the Central Excise Ac 3. Duty was already paid before issuance of show cause notice. The Tribunal has set side the levy of penalty by holding that since Duty has been paid prior to issuance of show cause notice, no penalty is leviable under Section 11-AC. D.B. Central Excise Appeal No. 76 of 2006. 4. The following substantial question of law has been framed at the time of admission of the appeal : "Whether the Tribunal was justified in holding that penalty under Section 11-AC of the Central Excise Act, 1944 cannot be levied where the manufacturer has deposited the amount of Duty and interest thereon before adjudication?" 5. The manufacturer respondent was given a show cause notice dated 27.03.2001 pointing out that the manufacturer has contravened the provisions of Section 4 of the Central Excise Act, 1944, Rule 5 of the Central Excise (Valuation) Rules, 1975 and Rules 173-F and 173-G of the Central Excise Rules, 1944 in respect of manufacture of P/V Yarn. Alongwith show cause notice, notice was also issued for proposed levy of penalty under Section 11-AC and Rule 173-Q alongwith notice for interest on duty. 6. Alongwith show cause notice, notice was also issued for proposed levy of penalty under Section 11-AC and Rule 173-Q alongwith notice for interest on duty. 6. Vide adjudication order dated 26.09.2001, the Joint Commissioner held the assessee liable for payment of short levied duty and also for levy of penalty under Section 11-AC & Rule 173-Q of the Central Excise & Rules. The amount of short levied duty on forwarding charges which the adjudicating officer sought to include in the monetary consideration. Short Duty was deposited by the manufacturer during the course of scrutiny but before issuance of the show cause notice. Penalties were imposed under Section 11-AC & Rule 173-Q. 7. On appeal, the Commissioner (Appeals) affirmed the short levy of duty and also the levy of penalty under Section 11-AC equal to amount of Duty short levied but set aside the penalty levied under Rule 173-Q in respect of very same defaults. 8. The Tribunal, however, held that in view of decision in CCE vs. Gaurav Mercantiles Ltd., reported in 2005 (190) ELT 11, since assessee has already deposited the amount of short levy of duty before issuance of show cause notice, no penalty was leviable and set aside the order of penalty in toto. 9. In these cases the respondents assessee have deposited the short levied Duty before issuance of show cause notice, which fact is not in dispute. The adjudicating authority levied the duty as well as penalty equal to the amount of duty with reference to Section 11-AC and he did not consider Rule 173-Q for the purpose of levy of penalty. The Tribunal has set aside the penalty by holding that since the assessee has paid short levied duty even before issuance of show cause notice, no case for penalty has been made out under Section 11-AC. In setting aside the penalty, the Tribunal has followed the decision of Bombay High Court in case of CCE vs. Gaurav Mercantiles Ltd., reported in 2005 (190) ELT 11. 10. The proposition appears to be well settled that where the duty has been deposited before issuance of show cause notice under Section 11-A & Section 11-AB of the Central Excise Act, 1944, no action under Section 11-AC of the said Act for imposition of penalty can be initiated or taken. The reason is obvious. 10. The proposition appears to be well settled that where the duty has been deposited before issuance of show cause notice under Section 11-A & Section 11-AB of the Central Excise Act, 1944, no action under Section 11-AC of the said Act for imposition of penalty can be initiated or taken. The reason is obvious. As on the date show cause notice is issued, there is no short levy of Duty for which such notices can be issued. 11. In Commissioner of Central Excise, Mangalore vs. Shree Krishna Pipe Industries, 2004 (165) ELT 508; Karnataka High Court, in Commissioner vs. Jkon Engineering (P) Ltd., 2005 (67) RLT 157; Madras High Court and in Commissioner of Central Excise vs. Gaurav Mercantiles Ltd., 2005 (190) ELT 11, Bombay High Court have all taken the view that where duty imposed has been deposited before issuance of the show cause notice under Section 11-AC of the Central Excise Act, 1944, no action under Section 11-AC of the Act, 1944 should be initiated or taken. 12. Further, the Karnataka High Court while considering the question opined that where the party even before issuance of show cause notice has deposited the duty, the inference can reasonably be drawn that there was no question of any fraud, misrepresentation or suppression of fact, which is essential foundation for levy of penalty under Section 11-AC of the Act of 1944, at all. In coming to this conclusion, the Karnataka High Court has referred to the decision of Tribunal in Rashtriya Ispat Nigam Ltd. vs. Commissioner of Central Excise, 2003 (161) ELT 285, appeal against which has been dismissed by the Supreme Court as reported in Commissioner of Central Excise vs. Rashtriya Ispat Nigam Ltd., 2004 (163) ELT A 53 (SC). 13. In view of the aforesaid consistent view of three different High Court and appeal against the Tribunals order taking the same view having been dismissed by Apex Court, and no other view contrary to it has been brought to our notice, we do not find any reason to take a different view. Accordingly, the appeals fail and are hereby dismissed.