Commissioner (LTU), Bangalore vs ACE Designers Pvt. Ltd.

N. Kumar, J.—This appeal is by the revenue challenging the order passed by the Tribunal which held that benefit granted by the Commissioner of Appeals in terms of the Board''s circular is in order and that as the duty had been paid before the issue of show cause notice, no penalty could be imposed under the Act.

The dispute between the parties relate to three items : (1) benefit to which the assessee is entitled to, in terms of the Board''s circular, (2) payment of penalty, and (3) payment of interest.

It is not in dispute that though the assessee did not pay the duty as and when it became due, before the issue of show cause notice he paid the duty to avoid payment of penalty if any, as the law stood then. He claimed the benefit in terms of the Board''s circular as at any rate, Board is estopped from contending to the contrary. Similarly, he denied the liability to pay interest. When the law being laid down by the Apex Court to the effect that before the penalty is imposed under the Act, the condition prescribed under the Section have to be fulfilled. Once it is fulfilled, then imposition of penalty is automatic. If the duty had been paid prior to the issue of show cause notice, the view that prevailed at that point of time was that no penalty could be imposed. Now that is not found favour by the Apex Court. The question is not when the duty is paid, but the question is to avoid liability to pay penalty whether the conditions prescribed in Section 11AC of the Act exist or not. Therefore, whether duty is paid prior to the show cause notice or after the show cause notice goes to the background.

It is submitted that before imposing penalty, the assessee is to be given an opportunity to offer explanation and to contend that none of the conditions prescribed in the Section exist in this case. It is only on consideration of such cause shown by him the authority has to decide to impose or not to impose penalty. That exercise was not done as it was not required to be done in view of the law as laid down. With the change in the law by the pronouncement of the Apex Court, though the view expressed by the authorities is no more correct, still the penalty is not automatic. Therefore an opportunity is to be given to the assessee to offer his explanation.

Similarly on the other two issues, when the benefit is extended in terms of the Board''s circular, still whether the authorities can deny the benefit contrary to the Board''s circular, requires re-examination. Similar is the case in so far as interest is concerned. In that view of the matter, it would be appropriate to set aside the entire order and remand the matter back to the Assessing Authority for fresh consideration of all the three issues set out above; after giving full opportunity to the assessee to have is say in the matter. Accordingly, we pass the following order:

Appeal is allowed.

We decline to answer none of the questions of law raised in the appeal.

We set aside all the orders passed and remand the matter back for fresh consideration by the authorities. Ordered accordingly.