HIGH COURT OF GUJARAT
Commissioner of Central Excise & Customs, Surat-I
Rita Dyeing & Printing Mills (P.) Ltd.
TAX APPEAL NO. 1217 OF 2011
AUGUST 6, 2012
N.V. Anjaria, J.
The Department has filed the present appeal under section 32G of the Central Excise Act, 1944 questioning the order dated 18.02.2011 of the Custom, Excise and Service Tax Appellate Tribunal, West Zonal Branch, Ahmedabad in Appeals No. E/813/2008 and E/842 to 848/2008, wherein the present respondent was one of the appellants.
1.1 While admitting the appeal, this Court formulated the following substantial question of law for consideration and determination.
“Whether the Tribunal below committed substantial error of law in giving option to the respondent to deposit duty, interest and @ 25% of duty amount towards penalty within 30 days from the date of receipt of the order of the Tribunal for availing benefit of the reduced penalty under the proviso to section 11AC of the Central Excise Act, 1944 by overlooking the fact that such benefit can be availed of only within 30 days from the communication of the original order.”
2. We heard learned Sr. Standing Counsel Mr. R.J. Oza assisted by learned advocate Ms. Rujuta Oza for the appellant department.
3. The controversy is in narrow compass. Noticing the relevant facts in brief, the respondent-assessee was engaged in processing of fabrics on job work basis. In course of preventive checking by the officers of the department, the assessee was found to have cleared in clandestine manner the processed fabrics without payment of excise duty. A show cause notice dated 22.05.2007 was issued which culminated into order by the adjudicating authority dated 31.12.2007 and the authority confirmed duty under Proviso to sub-section (1) of section 11A of the Central Excise Act, 1944 (hereinafter referred to as ‘the Act’ for sake of brevity). The adjudicating authority imposed penalty equal to the duty amount and the director of the unit was also subjected to penalty under Rule 26 of the Central Excise Rules, 2002.
3.1 The assessee preferred appeal before the Commissioner (Appeals), Central Excise, who upheld the finding regarding clandestine manufacture and removal of excisable goods without payment of duty and accordingly confirmed the duty. He, however, reduced the amount of penalty considering the fact that the assessee had immediately deposited the amount of duty. Thereafter, the respondent preferred appeal before the Custom, Excise and Service Tax Appellate Tribunal against the order of the Commissioner. The Tribunal gave option to the assessee to deposit the entire duty, interest and 25% of the penalty within 30 days.
4. The only contention of the appellant-assessee before the Tribunal was that the lower authority ought to have given option to the appellant to pay the entire duty within 30 days and reduce the penalty amount to 25% in terms of Proviso to section 11AC. That was the only point required to be considered by the Tribunal.
4.1 It will be useful to extract relevant part of section 11AC of the Act.
“11AC. Penalty for short-levy or non-levy of duty in certain cases.
11AC. Penalty for short-levy or non-levy of duty in certain cases.-Where any duty of excise has not been levied or paid or has been short-levied or short-paid or erroneously refunded by reasons of fraud, collusion or any willful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty, the person who is liable to pay duty as determined under sub-section (2) of section 11A, shall also be liable to pay a penalty equal to the duty so determined:
Provided that where such duty as determined under sub-section (2) of section 11A, and the interest payable thereon under section 11AB, is 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:
Provided also that where the duty determined to be payable is reduced or increased by the Commissioner (Appeals), the Appellate Tribunal or, as the case may be, the Court, then, for the purposes of this section, the duty, as reduced or increased, as the case may be, shall be taken into account:
Provided also that in case where the duty determined to be payable is increased by the Commissioner (Appeals), the Appellate Tribunal or, as the case may be, the Court, then, the benefit of reduced penalty under the first proviso shall be available, if the amount of duty so increased, the interest payable thereon and twenty-five per cent. of the consequential increase of penalty have also been paid within thirty days of the communication of the order by which such increase in the duty takes effect.”
4.2 As per the First Proviso of the section, if assessee pays duty and interest within 30 days from the date of communication of the order, the amount of penalty will be reduced to 25% of the duty determined and the assessee would have to pay penalty to the extent of 25% only. The Second Proviso says that the benefit of the First Proviso would be available provided that the reduced penalty is also paid within the period of 30 days referred to in that Proviso. The Third and Fourth Proviso are to the effect that if the penalty is enhanced by the appellate authority, the benefit of reduced penalty shall be available, if the amount is deposited within a period of 30 days of the communication of such order of enhancement.
5. In C.C.E. v. Swati Chemicals Industries Ltd. 2009 (248) ELT 421 (Tri-Ahd.), the Ahmedabad Bench of the Tribunal by relying on decision of Punjab & Haryana High Court in CCE v. JR Fabrics (P.) Ltd. 2009 (238) ELT 209 (Punj. & Har.), which in turn had taken note of the apex decision in Union of India v. Dharamendra Textile Processors 2008 (231) ELT 3 (SC), observed as under
“In terms of above judgment of Hon’ble High Court of Punjab & Haryana, the orders not giving such an option to the assessees are illegal and have to be set aside. If that be so, the matters need to be remanded for adjudging penal liabilities in terms of Apex Court’s judgment in the case of Dharamendra Textiles, along with extending option in terms of 1st and 2nd Provisos to Section 11AC. In such a scenario, the period of 30 days to deposit the dues along with 25% of penalty shall start running from the date of passing fresh orders by the adjudicating authority. However, instead of adopting the above route, penalties can be enhanced at appellate level with option to deposit reduced penalties along with other dues within a period of thirty days from the date of passing appellate orders, in terms of 3rd and 4th Provisos to Section 11AC.”
5.1 This High Court in CCE&C v. Harish Silk Mills 2010 (255) ELT 393 (Guj.) and in CCE&C v. Gopal Fibres (P.) Ltd. 2010 (256) ELT 10 (Guj.), observed that the option to pay within 30 days under the Proviso concerned to section 11AC of the Act, if not given by the adjudicating authority, such option should be given to the assessee at the appellate stage and the period of 30 days would commence from the date of giving such option.
5.2 The aforesaid position of law holds the field as on date. Learned counsel for the department could not dispute the same.
5.3 In the present case, the authorities did not give the option to the assessee, despite the law requiring to give such option. The Tribunal gave that option by observing:
“The lower authorities have not extended any option to the appellant to pay the entire dues along with 25% of the penalty within a period of thirty days from the passing of the orders so as to reduce the penalty to 25%. The law declared in the above decisions is to the effect that if no such option stands granted by the lower authorities, the same can be granted by the higher appellate forum. Accordingly, while upholding the confirmation of demand of imposition of penalty to the extent of 100%, I give an option to the appellant to deposit the entire duty, interest and 25% of penalty within a period of thirty days from today, in which case the penalty shall stands reduced to 25%.”
6. In the aforesaid view, no illegality is committed by the Tribunal in giving option to the respondent-assessee under the Proviso to section 11AC of the Act. It is held that the benefit of payment of reduced penalty can be availed by the assessee at the appellate stages also and it is not the import of the said provision that such benefit can be availed of only within 30 days from the communication of original order.
7. The substantial question of law formulated is answered accordingly in negative in favour of the assessee. The appeal is dismissed.