ORDER
P.G. Chacko, Member (J)
1. These appeals of the Department are against non-imposition of penalty on the respondents under Section 11AC of the Central Excise Act by the Commissioner.
2. After examining the records, we find that, in each of these ease, the Commissioner demanded central excise duty from the assessee in adjudication of a Show-cause notice issued by the Department beyond the normal period prescribed under Section 11A(1) of the Central Excise Act. The respondents were found to have suppressed the material facts relating to the subject goods from the Department and accordingly the larger period of limitation under proviso to Section 11A(1) was invoked against them for the demand of on the said goods. The demand on the respondents in appeal No. E/441/03 amounts to Rs. 3,30,117/- which is for the period 1995-96 to 1998-99. Show-cause notice to them was issued on 25.10.2000. The demand on the respondents in other Appeal is to the tune of Rs. 31,69,507/- and the same is for the period 1995 – 96 to 1999- 2000. In this case, show-cause notice was issued on 21.6.01. Ld. Commissioner, while confirming the demand of duty against the assessee, refrained from imposing any penalty on them under Section 11AC ibid, though he imposed penalties on them under Rule 173Q of the Central Excise Act, 1944. The considerations that went into reckoning for avoiding penalty under Section 11AC are (i) that the respondents arc laymen not in the know of the relevant statutory provisions and (ii) the case involves interpretation of exemption Notification as also of provisions of law. It is the appellant’s case that it was not open to the Commissioner to drop the proposal for penalty under Section 11AC inasmuch as the demand of duly was confirmed under proviso to Section 11A(1) of the Act. In other words, where the proviso is invoked for demanding duly from an assessee, a penalty under Section 11AC is mandatory. The same argument advanced for levying interest on the duty amounts under Section 11AB of the Act. Apart from these, the Department has a further grievance against the Commissioner’s orders, which is that the benefit of abatement of duly from sale price was allowed to the assessee under Section 4(4)(d)(ii) of the Central Excise Act. It is stated that the Department has filed a review petition against the Supreme Court’s judgment in the case of CCE, Delhi v. Maruti Udyog Ltd. wherein the benefit of Section 4(4)(d)(ii) had been allowed to the assessee in a similar set of facts. Ld. SDR has reiterated this ground of the appellant.
3. Ld. Counsel for the respondents submits that, in a ease like this involving interpretation of Notifications, is not correct to invoke Section 11AC for imposing penalty. In this connection, reliance is placed, on the Tribunal’s decision in the Prem Pharmaceuticals Ltd. v. CCE wherein a penalty imposed on the party under Section 11AC was set aside on the ground that the dispute in the case involved interpretation of the scope of exemption Notifications. Ld. Counsel has also relied on the Supreme Court’s judgment in CCE, Delhi v. Dabur (India) Ltd. . As regards interest on duty under Section 11AB, there is no serious contest.
4. After considering the submissions made by both sides, we have found nothing in any of the decision cited, to indicate that a penalty under Section 11AC need not be imposed on an assessee against whom there is a demand of duty under the proviso to Section 11A(1) of the Central Excise Act. It is not in dispute that the requirements for a penalty under Section 11AC are essentially the same as those for invoking larger period of limitation under the proviso to Section 11A(1). In the instant case, the proviso was invoked on valid grounds and the demands of duty were confirmed. These demands are not under challenge. The grounds for demand of duty under the provision to Section 11A(1) are equally operative for a penalty under Section 11AC. Hence we are not in a position to reject the appellant’s contention that a demand of duty under the proviso to Section 11A(1) must be accompanied by penalty under Section 11AC. In this view of this matter, the penalty can be said to be mandatory. However, as regards quantum of penalty, it is settled law that the quasi-judicial body authority has a discretion, which has to be exercised on sound judicial principles in the facts and circumstances of the case. It was this discretion which was exercised by the Tribunal in Dabar’s case (supra), and such exercise of discretion was sustained by the apex Court. On the other hand, in the case of Prem Pharmaceuticals Ltd. (supra), it was clearly found by the Tribunal that there was no suppression or misstatement of relevant facts by the party. This would indicate that the proviso to Section 11A(1) was not invoked in that case for demanding duty from the party. Hence the said decision is not much of aid to the respondents in these appeals. However, in the case of Prem Pharmaceuticals (supra), one of the considerations for the Tribunal to vacate penalties under Section 11AC and Rule 173Q was that the case involved interpretation of the scope of exemption Notification. We find that a similar consideration has worked with the adjudicating authority in the present case also, though for a wrong purpose. Such considerations are not to be applied for dropping penalty which is mandatory under law. However, such considerations would be germane to, the determination of the quantum of penalty. In the present case, we have taken note of the fact that both the respondents were working as SSI Units during the material period. Interpretation of exemption Notifications was involved in the case of both the assesses. Taking into account these aspects, we are inclined to impose moderate penalties under Section 11AC on the respondents. Accordingly there will be penalty of Rs. 10,000/- (Rupees Ten Thousand) on the respondents in appeal number E/441/03 and a penalty of the Rs. one lakh one the respondents in the other appeal. The amounts of duty will carry interest in terms of Section 11AB.
5. The review petition filed by the department in the Supreme Court has since been dismissed vide CCE, New Delhi v. Maruti Udyog Ltd. 2005 (177) ELT A102 (SC). The respondents are entitled to the benefit of Section 4(4)(d)(ii) of the Act in the matter of determination of assessable of the subject goods. L.d. Commissioner has rightly allowed this relief to the assessee. The challenge in the present appeals against this part of the orders of the commissioner fails. The rest of the challenge, regarding penalty under Section 11AC and interest under Section 11AB succeeds to the extent aforesaid.
6. The impugned orders will stand modified to the above extent and these appeals are disposed of.
(Order dictated and pronounced in open Court)