Case Law Details

Case Name : Commissioner of Central Excise Vs Chandan Milk & Agro Products Pvt. LTD. (CESTAT Mumbai)
Appeal Number : ST/88092/13
Date of Judgement/Order : 22/12/2015
Related Assessment Year :
Courts : All CESTAT (169) CESTAT Mumbai (50)

Urvashi Porwal

Urvashi PorwalBrief of the Case

In the case of Commissioner of Central Excise, Aurangabad Vs. Chandan Milk & Agro Products Pvt. LTD, it was held that the benefit of payment of penalty of 25% of tax liability cannot be extended if the assessee has not paid the amount of tax, interest and 25% of the penalty within 30 days from the receipt of the order.

Facts of the Case    

The issue involved in this case is that Revenue is aggrieved by the impugned order on the ground that the first appellate authority has reduced the penalty imposed under Section 78 to 25% of the tax liability which he could not have done so and also set aside the penalty imposed under Section 76 for the period September 2007 to 9th May 2008 relying upon the provisions of Section 78 of the Finance Act, 1994.

Contentions of the Department

The department submitted that the first appellate authority has erred in extending the benefit of payment of penalty of 25% of tax liability confirmed. The respondent has not paid the amount of tax, interest and 25% of the penalty within 30 days from the receipt of the order-in-original. The department submitted that the issue is now settled by the Hon’ble High Court of Bombay in the case of CCE India Raigad v. Castrol Ltd.- 2012 (286) ELT 194 (Bom.) and Sri Sai Enterprises v. CCE- 2013 (288) ELT 40 (Del.). As regards the penalty under Section 76 for the period September 2007 to 9th May 2008, the department submitted that simultaneous penalty can be imposed is the law which is settled by the Apex Court in the case of Board of Control for Cricket in India v. CST Mumbai -2015-TIOL-04-SC-ST.

Contentions of the Assessee

The assessee submitted that the reduced penalty of 25% is correctly extended by the first appellate authority relying on the Board’s Circular No. 208/07/2008/CX-6 dated 22.05.2008. The assessee submitted that para No.3 of the said Circular which states that the proviso to Section 11AC should be mandatorily mentioned in the order-in-original itself by the adjudicating authority, and if not mentioned, the first appellate authority can extend the same. The assessee relied upon the judgement in the case of CCE v. Sidhi Vinayak Dyg. & PTG. Mills – 2010 (261) ELT 663 which has been confirmed by the Hon’ble High Court of Gujarat as reported at 2011 (265) ELT 869 (Guj) and also relied on judgemnt of the Hon’ble High Court of Punjab and Haryana in the case of CCE v. City Cables – 2013 (31) STR 279 (P&H) in which similar view has been taken.   As regards the penalty under Section 76 and 78 the assessee submitted that simultaneous penalty cannot be imposed under Section 76 and 78 of the Finance Act, 1994.

Held by Hon’ble CESTAT

The Hon’ble CESTAT stated that as regards the extending benefit of reduced penalty of 25% to the respondent by the first appellate authority, the Hon’ble High Court of Bombay in the case of Castrol India Ltd. (supra) considered an identical issue. In that case the department had not extended the benefit of reduced payment of penalty of 25% though the provisions of Section 11AC were in place. The assessee therein contested the order-in-original before the Tribunal and the Tribunal extended the benefit of reduced payment of 25% of the duty confirmed. This judgement of the Tribunal was set aside by the Hon’ble High Court by recording as under:-

“If the contention of the assessee that even the appellate authority can direct the assessee covered under Section 11AC to pay 25% of the penalty within thirty days from the date of communication of the order passed by the appellate authority is accepted, then it would defeat the very object with which the incentive under Section 11AC is allowed. The basic object of granting incentive under Section 11AC is to encourage payment of duty sought to be evaded with interest and penalty at 25% within the time stipulated therein. When the legislature specifically fixes the time-limit within which the duty with interest and penalty at 25% is to be paid for availing the incentive, it would neither be open to the appellate authority nor any other authority to permit the assessee to pay 25% penalty at any time other than the time prescribed under Section 11AC.

In the present case, the applicability of Section 11AC is not in dispute. It is also not in dispute that the assessee has paid the duty sought to be evaded as also the interest payable thereon under Section 11AB before the passing of the adjudication order. Admittedly, the assessee has not paid 25% of the penalty imposed under Section 11AC within thirty days from the date of the communication of the order of Central Excise Officer determining the duty sought to be evaded under Section 11A(2) of the Act which is the mandatory requirement under Section 11AC. Instead of paying 25% of the penalty within the stipulated time, the assessee has chosen to file an appeal against imposition of penalty under Section 11AC and the Tribunal has permitted the assessee to pay 25% penalty beyond the time prescribed under the proviso to Section 11AC which is not permissible in law.”

The Hon’ble CESTAT further stated that an identical view has been expressed by the Hon’ble High Court of Delhi in the case of Sri Sai Enterprises (supra).

The judgement relied upon by the assessee in the case of City Cables (supra) and Siddhi Vinayak Dyg. & Ptg. Mills (supra) were delivered by the Hon’ble High Courts, prior to the judgement of Hon’ble High Court of Bombay in the case of Castrol India Ltd. (supra). Be that as it may, as it is settled that the judgement on a particular issue which passed by a Jurisdictional High Court, judicial discipline needs to be followed in preference to any other judgements. In view of this, the impugned order which extended the benefit of 25% of payment of penalty to the respondent is incorrect and liable to be set aside and I do so.

As regards the simultaneous penalties imposed under Section 76 and 78 for the period September 2007 to 9th May 2008, the respondent is required to discharge the penalty under Section 76 and 78 of the Finance Act, 1994 as per the judgement of the Apex Court in the case of Board of Control for Cricket in India (supra).

Accordingly, in view of the foregoing the appeal filed by Revenue is allowed.

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