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TAXAP/2592/2009 11/ 13 ORDER
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX
APPEAL No. 2592 of 2009
=========================================================
COMMISSIONER
OF CENTRAL EXCISE - Appellant(s)
Versus
CONY
ENGINEERING - Opponent(s)
=========================================================
Appearance
:
MR
YN RAVANI for
Appellant(s) : 1,
None for Opponent(s) :
1,
=========================================================
CORAM
:
HONOURABLE
MR.JUSTICE K.A.PUJ
and
HONOURABLE
MR.JUSTICE RAJESH H.SHUKLA
Date
: 17/02/2010
ORAL ORDER
(Per : HONOURABLE
MR.JUSTICE K.A.PUJ)
The
Commissioner of Central Excise, Ahmedabad has filed this Tax Appeal
under Section 35-G of the Central Excise Act, 1944 proposing to
formulate the following substantial question of law for the
determination and consideration of this Court :-
Whether the CESTAT
committed error in interpreting proviso of Section 11AC of the
Central Excise Act, 1944 by offering to an assessee to deposit amount
of interest and penalty within 30 days of its order to avail benefit
of reduced penalty at 25% of duty, though CESTAT has not
re-determined the quantum of duty ?
Heard
Mr. Y. N. Ravani, learned Standing Counsel appearing for the Revenue
and perused the orders passed by the authorities below.
The
brief facts giving rise to this appeal are that the adjudicating
authority had passed an order in original on 28.09.2005 wherein he
confirmed the demand of duty of Rs.8,800/- + Rs.5,19,848/-. The
penalty of Rs.2,50,000/- was imposed under Section 11AC read with
Rule-25 of Central Excise Rules, 2002. It was also ordered to
recover the interest under Section-11AB of of Central Excise Act,
1944. The respondent assessee has challenged this order before the
Commissioner (Appeals) who vide his order dated 26.6.2006 upheld the
demand to the tune of Rs.5,19,848/- + Rs.8,800/- and set aside the
penalty of Rs.2,50,000/- imposed under Section-11AC of the Act. It
is also relevant to note that the Department being aggrieved by the
order-in-original dated 28.9.2005 also filed an Appeal before the
Commissioner (Appeals) for enhancement of penalty under Section-11AC
of the Act. The Commissioner (Appeals) vide his order dated
28.9.2007 held that once an order-in-original has been considered in
its totality the Revenue is not justified to challenge any part of
such order before the Appellate Authority. Being aggrieved by the
order of Commissioner (Appeals) passed in Appeal filed by the
assessee, the Revenue filed second appeal before the Tribunal.
Similarly the Revenue has also filed second appeal before the
Tribunal against the order passed by the Commissioner (Appeals) in
the Appeal filed by the Revenue. The tribunal vide its order dated
11.11.2007/22.9.2008 decided both Appeals filed by the Department
wherein, while restoring the penalty imposed by the original
authority, the same was reduced to Rs.1,29,962/-.
Being
further aggrieved by the said order of the Tribunal, the Revenue
filed Tax Appeal No.1933 of 2008 before this Court for enhancement
of penalty equal to duty evaded under Section 11AC of the Central
Excise Act. This Court vide its order dated 23.06.2009 decided the
said tax appeal and remanded the matter to the Tribunal with a
direction to decide the issue afresh in light of the Apex Court
decision in the case of M/s. Dharmendra Textile Processors, 2008
(231) ELT 3 (SC).
Pursuant
to the order of this Court, the Tribunal decided the appeal and by
its common order passed in 17 matters on 15/16/17.07.2009, has
enhanced the penalty equal to the duty confirmed against the
respondent assessee. However, relying upon the judgment of the
Punjab & Haryana High Court in the case of Commissioner of
Central Excise, Rohtak V/s. J.R. Fabrics Private Limited, 2009 (238)
ELT 209 (P&H) set aside the order passed by the adjudicating
authority with a direction to give an option to the respondent
assessee to deposit 25% of the penalty within a period of 30 days of
the communication of the order, in which case the penalty shall
stand restricted to 25% of the duty amount.
It
is this order which is under challenge in the present tax appeal.
Mr.
Ravani has submitted that in the remand matter, the Tribunal has
wrongly passed an order by incorrect interpretation of the decision
of the Apex Court in the case of M/s. Dharmendra Textile Processors
(Supra). He has further submitted that the Tribunal can give such
option to the assessee only on those cases, where the duty demanded
to be payable has reduced or increased by it, which is clearly
stipulated in the Central Excise Act. Third and fourth proviso to
Section 11AC is regarding giving benefit of reduced penalty of 25%
of the duty, in case the duty determined is changed (either
increased or decreased) by the appellate authorities. However, in
the present case, the Tribunal has not redetermined the quantum of
duty and, therefore, the Tribunal has no power to give the option to
pay reduced penalty of 25% of the duty within 30 days of
communication of its order to the assessee.
Mr.
Ravani has invited the attention of the Court to the recent Circular
dated 15.09.2009 issued by the Central Board of Excise &
Customs, clarifying that in order to avail the benefit of 25%
penalty, the duty, interest and penalty are required to be paid
within 30 days of communication of the order passed by the
adjudicating authority. The fourth proviso to Section 11AC
stipulates that wherever duty amount is increased at any appellate
stage, in that case, in order to avail the benefit of 25% penalty,
the assessee is required to pay differential amount within 30 days
of the passing of the order by the appellate authority. A combined
reading of all the four proviso would, therefore, make it clear that
the benefit of 25% penalty is applicable only when the assessee has
paid duty, interest and the reduced penalty within 30 days of
communication of the order passed by the adjudicating authority.
Mr. Ravani has, therefore, submitted that the intention of
legislation is to provide the option of reduced penalty when first
time issue is adjudicated by original authority. It has never
intended to provide option at first appellate stage or even by the
Tribunal.
We
have considered the submissions made by Mr.
Ravani and also perused very minutely the order passed by the
authorities below. As a matter of fact, all these submissions urged
by Mr. Ravani were already considered by this Court in its order
dated 18.11.2009 in the case of Messers
Exotic Associates Vs. Commissioner of Central Excise (Tax Appeal
No.572 of 2007 with Tax Appeal No.869 of 2007 and Tax Appeal No.1942
of 2008, in the case of Commissioner of Central Excise & Customs
Vs. Rama Synsilk Mills P. Ltd., decided on 21.1.2010.
This Court after considering the decision of Commissioner
of Central Excise Vs. Malbro Appliances, 2007 (79) RLT
109 (Delhi), Union of India Vs. Dharmendra Textiles, 2008 (231) ELT
3 (SC), Union of India Vs. Rajasthan Spinning & Weaving Mills,
2009 (238) ELT 3 (SC), K. P. Pouches (P) Ltd., Vs. Union of India,
2008 (228) ELT 31 (Delhi), Commissioner of Central Excise, Rohtak
Vs. J. R. Fabrics Pvt. Ltd., 2009 (238) ELT 209,
has taken the view that the order passed by the Tribunal retaining
the penalty of 25% of the duty amount seems to be quite justified.
For the reasons recorded in the said two judgments, we do not feel
it necessary to take any different view in this Appeal.
We
have an occasion to deal with similar such submission made on behalf
of Revenue with regard to non-compliance of the pre-condition for
availment of benefit of reduced penalty under proviso to Section
11AC of the Central Excise Act, 1944. As per the first proviso, the
duty amount was not paid with interest
and even the reduced penalty of 25% was not deposited by the
respondent within 30 days from the date of such determination, as
required under second proviso to Section 11AC of the Act. Despite
this, the Court has granted benefit of the Proviso by issuing
direction to the adjudicating authority to give
an option to the assessee.
Even
with regard to the submission of Mr. Ravani that the adjudicating
authority is not under any statutory obligation to set out in its
order, the availability of benefit of reduced penalty prescribed
under proviso to Section 11AC of the Central Excise Act and to give
an option to such person liable for penalty under that Section, was
considered by us in Tax Appeal No.572 of 2007 with tax Appeal No.869
of 2007 decided on 18.11.2009. We have observed therein that the
adjudicating authority has not calculated the interest neither in
the order-in-original nor even
thereafter. It is, therefore, too much to expect from the respondent
– assessee to pay the interest alongwith the duty amount in absence
of such calculation of interest. As far as statutory obligation of
the adjudicating authority is concerned, the Central Excise
Department itself has earlier issued
Circular on 22.5.2008 wherein it is clarified that in all cases
wherein penalty under Section 11AC of the Act is imposed, the
provisions contained in the first and second proviso of Section 11AC
should be mandatorily mentioned in the order-in-original itself by
the adjudicating authority. It is, therefore, not open for the
revenue to agitate this issue before the Court in contradiction of
the Circular issued by the Central Excise Department. This Court in
Messers Exotic Associates (Supra)
has directed the
adjudicating authority to pass a fresh order giving option to the
assessee to pay the duty amount within 30 days by making it
explicitly clear in the
order itself that if the assessee wants to avail such option he is
permitted to do so. In the case on hand, since the duty amount has
already been paid by the respondent – assessee and if the interest
and/or reduced penalty of 25% were not paid by the respondent –
assessee, the adjudicating
authority may send a communication to the respondent – assessee
indicating therein that the particular amount of interest and/or 25%
of the penalty of the duty amount is not paid by the respondent –
assessee and hence if the assessee wants to avail the benefit of the
reduced penalty of 25%, such amount of interest and/or penalty of
25% should be paid within 30 days from the date of receipt of such
communication, failing which they would be liable to pay penalty
under Section 11AC equivalent to the amount of duty.
Since the order passed by
the Tribunal is in accordance with the view taken by this Court,
there is no question of considering the Circular issued by the
Central Board of Indirect Taxes on which reliance was placed by Mr.
Ravani.
In
the above view of the matter, we do not see any substance in this
tax appeal and no substantial question of law can be said to have
arisen out of the order of the Tribunal. This appeal is, therefore,
summarily dismissed.
[K. A. PUJ, J.] [RAJESH H. SHUKLA, J.]
kks
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