Case Law Details
Salasar Steel Vs Union of India (Chhattisgarh High Court)
Introduction: The Chhattisgarh High Court recently addressed a crucial matter in the case of Salasar Steel vs Union of India. The dispute revolves around the order of the Adjudicating Authority, specifically concerning the non-quantification of interest and the omission of an option to pay reduced excise penalties. This article provides an in-depth analysis of the judgment, the legal provisions involved, and the implications for the parties involved.
Understanding the Dispute:
1. Key Points of Contention: The petitioner, Salasar Steel, challenges the order of the Adjudicating Authority, citing non-compliance with the circular dated 22.5.2008 issued by the Central Board of Excise & Customs. The central issues include the failure to quantify interest and the omission of an option to pay a reduced penalty under the first proviso to Section 11AC of the Central Excise Act, 1944.
2. Legal Framework: The judgment refers to Section 11AC of the Act, particularly the first proviso, which outlines conditions for reduced penalties if duty and interest are paid within a stipulated timeframe. The court also highlights the circular issued by the Central Board of Excise & Customs, emphasizing the mandatory mention of the first and second provisos in the order-in-original.
Analysis of Legal Precedents:
Delhi High Court’s Precedent: The article explores the precedent set by the Delhi High Court in the case of K.P. Pouches (P) Ltd. vs Union of India. The court mandated explicit mention of available options in the adjudication order, providing clarity to both the Assessee and the Revenue.
Gujarat High Court’s Observation: Drawing from the Gujarat High Court’s observation in Commissioner of C. Ex. & Cus., Surat-II vs Gopal Fibers Pvt. Ltd., the article emphasizes that the Adjudicating Authority is obligated to calculate interest and explicitly state the options available to the Assessee under Section 11AC.
Implications and Remedy:
1. Non-Quantification of Interest: The article highlights the critical lapse in the adjudication order— the failure to quantify statutory interest payable by Salasar Steel. This is in direct violation of legal principles laid out by the Delhi High Court and the Central Board of Excise & Customs.
2. Omission of Reduced Penalty Option: The judgment faults the Adjudicating Authority for neglecting to provide Salasar Steel with the option of paying a reduced penalty as stipulated by the first proviso to Section 11AC. This omission undermines the Assessee’s ability to make an informed decision.
Court’s Decision and Remand: The Chhattisgarh High Court, recognizing the flaws in the adjudication order, sets aside the non-quantification of interest and omission of the reduced penalty option. The matter is remitted back to the Adjudicating Authority with explicit instructions to calculate interest under Section 11B and afford the Assessee the option of reduced penalties. The court emphasizes adherence to the circular and the precedents set by other high courts.
Conclusion: This article delves into the intricacies of the Salasar Steel vs Union of India case, shedding light on the dispute’s nuances, legal precedents, and the implications of the Chhattisgarh High Court’s decision. The judgment serves as a reminder of the importance of procedural compliance in adjudication orders, ensuring a fair and informed process for both the Assessee and the Revenue.
FULL TEXT OF THE JUDGMENT/ORDER OF CHHATTISGARH HIGH COURT
1. The extraordinary jurisdiction of this Court is invoked calling in question the order passed by the Adjudicating Authority levying the duty under first proviso to Section 11AC of the Central Excise Act, 1944 (hereinafter called as ‘the Act of 1944’) and also levying interest under Section 11AB of the Act of 1944 and imposing penalty of ₹ 1,37,55,732/- for having committed fraud with intent to evade Central Excise Duty.
2. Kartik Kurmi, learned counsel for the petitioner restricting his submission to a singular contention, would submit that learned Adjudicating Authority while passing the impugned order has failed to comply with the circular dated 22.5.2008 issued by the Central Board of Excise & Customs which has been read by the Delhi High Court in the matter of K.P. Pouches (P) Ltd. v. Union of India1 and therefore, the part of impugned order not quantifying the interest and not giving option as per first proviso to Section 11AC (unamended) of the Act of 1944 be set aside and the matter be remanded back to the Adjudicating Authority for passing the order afresh in accordance with the above-stated circular issued by the Central Board of Excise and Customs and the writ petition be allowed to that extent.
3. Mr. Vinay Pandey, learned counsel for the respondents, would submit that the order passed by the Adjudicating Authority is strictly in accordance with law and no interference is called for and the writ petition deserves to be dismissed.
4. I have heard learned counsel for the parties and considered their rival submissions made herein-above and also went through the records with utmost circumspection.
5. In order to appreciate the point in dispute, it would be appropriate to notice unamended Section 11AC (as it stands on 8.4.2011 and applicable to the case in hand) which states as under:-
“11AC. Penalty for short-levy or non-levy of duty in certain cases.-Where any duty of excise has not been levied for paid or has been short-levied or short-paid or erroneously refunded by reasons of fraud, collusion or any wilful misstatement 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 11B, 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 preferred 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.”
6. The first proviso to Section 11AC of the Act of 1944 as quoted herein-above was considered by the Delhi High Court in K.P. Pouches (P) Ltd. (supra) and it has been held as under:-
“27. To obviate any similar situation from arising in future, we are of of the opinion that in its adjudication order the adjudicating authority under the Act should explicitly state the options available to the Assessee under Section 11AC of the Act. Once the choices are made known to the Assessee and it still does not take advantage of the first proviso to Section 11AC of the Act, it will be entirely at its own peril. Therefore, it would be beneficial, both from the point of view of the Revenue as well as the Assessee, if the options available to the Assessee are mentioned in the adjudication order itself.”
7. Thereafter, taking cognizance of the order of the Delhi High Court in K. P. Pouches (P) Ltd. (supra), the Central Board of Excise & Customs on 22.5.2008 issued a circular in which it has been held as under:-
“3. In view of the points as discussed above, Board has decided that in all the cases, wherein penalty under section 11AC of the Act is imposed, the provisions contained in first and second proviso to section 11AC should be mandatorily mentioned in the Order-in Original itself by the adjudicating authority.”
Thus Delhi High Court has directed the adjudicating authority to comply with first and second provisos mandatorily and further held that it must be mentioned in order-in-original.
8. Not only this, subsequently, the High Court of Gujarat in the matter of Commissioner of C. Ex.& Cus., Surat-II v. Gopal Fibers Pvt. Ltd.2 dealing with similar issue has held that Assessee could not be expected to pay interest in absence of its calculation. It was observed as under:-
“10. However, Mr. Oza has made two more submissions in this Tax Appeal. He has emphatically stated that the respondent has not complied with 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% is 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. So far as second issue is concerned, Mr. Oza submitted 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. Both these issues were dealt with by this Court in Tax Appeal No.572 of 2007 with tax appeal No.869 of 2007 decided on 18-11-2009 [2010 (252) E.L.T. 49 {Guj.]). It is also important to note 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 along with the duty amount in absence of such calculation of interest. As far as statutory obligation of the adjudicating concerned, the Central Excise Department itself has 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 is 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.”
9. Following the principle of law laid down by the Delhi High Court and the Gujarat High Court in the aforesaid judgments (supra), reverting to the facts of the present case, it is quite vivid that the adjudicating authority while passing the order neither quantified the interest payable under proviso to Section 11B nor gave option to the petitioner to pay the reduced penalty in terms of first proviso to Section 11AC of the Act of 1944, which is in breach of the circular of the Central Customs and contrary to the judgment rendered by the Delhi High Court in K.P. Pouches (P) Ltd. (supra). In fact, the adjudicating authority ought to have quantified the statutory interest payable by the petitioner and further given option to the petitioner in the original order as mandatorily required by the judgment of the Delhi High Court in K.P. Pouches (P) Ltd. (supra) and later explained by the Central Board of Excise & Customs.
10. In view of above-stated legal analysis, the order passed by the adjudicating authority non-quantifying statutory interest payable to the petitioner and not giving option to pay reduced penalty is held to be bad. The matter is remitted to the adjudicating authority who shall quantify the interest payable under Section 11B of the Act of 1944 by the petitioner and shall also give option to the petitioner to reduce penalty in terms of proviso to Section 11AC of the Act of 1944. The adjudicating authority will pass order afresh after hearing the parties within 60 days from the date of production/receipt of certified copy of this order and it will be communicated to the petitioner.
11. No other point was pressed into service.
12. The writ petition is allowed to the extent indicated hereinabove.
Notes
1 2008 (228) E.L.T. 31 (Del.)
2 2010 (256) E.L.T. 10 (Guj.)
