Commissioner of C. Ex. vs R.A. Shaikh Paper Mills Pvt. Ltd.

K.A. Puj, J.—Leave to amend as per the draft amendment.

The Commissioner of Central Excise & Customs, Surat-I has filed this tax Appeal u/s 35G of the Central Excise Act, 1944 proposing to formulate the following substantial questions of law for determination and consideration of this Court;

Whether in the facts and circumstances of the case, the Tribunal has committed a substantial error of law in reducing the mandatory penalty imposed on the Respondent Assessee u/s 11AC of the Central Excise Act, 1944 to the extent of 25% despite having confirmed the duty on account of clandestine removal and evasion of Central Excise duty?

Heard Mr. R.J. Oza, learned Standing Counsel appearing for the Revenue and perused the order passed by the authorities below.

At the time of hearing of this Tax Appeal Mr. Oza reframed the substantial questions of law which are as under:

(a) Whether or not benefit of reduced penalty under proviso to Section 11AC of the Central Excise Act, 1944 can be extended to such person who has not paid amount of interest determined by the adjudicating authority payable u/s 11AB of the Central Excise Act, 1944?

(b) Whether or not benefit of reduced penalty under proviso to Section 11AC of the Central Excise act, 1944 can be extended to such person who has paid, before issuance of show cause notice only duty determined by the adjudicating authority payable u/s 11A(2) of the Central Excise Act, 1944?

(c) Whether the adjudicating authority is statutorily obliged to set out in his order the availability of benefit of reduced penalty prescribed under proviso to Section 11AC of the Central Excise Act, 1944 and to give option to such person liable for penalty u/s 11AC of the Central Excise Act, 1944?

(d) Whether in the facts and circumstances of the case, the Tribunal is justified and has committed substantial error of law in placing reliance on the decision rendered by the Hon''ble High Court in the case of Commissioner of Central Excise Vs. Malbro Appliances P. Ltd., and in case of K.P. Pouches (P) Ltd. Vs. Union of India (UOI),

(e) Whether the impugned order made by the Tribunal can be said to be an order in accordance with law?

(f) Whether or not in the facts and circumstances of the case the Tribunal has committed substantial error of law in reducing penalty to 25% of the duty amount on the Respondent?

Mr. Oza submitted that the Tribunal has not recorded any reasons setting out facts of the case of the Respondent and has mechanically passed order extending benefit of reduced penalty on the Respondent. He has further submitted that the team of Central Excise Officers had carried search of the Respondent''s premise on 17-8-2001 and detected evasion of Central Excise duty payable by the Respondent as on the date of the said search. The show cause notice was issued on 28-3-2003. The adjudicating authority has passed order dated 30-4-2004 demanding central excise duty amounting to Rs. 16,49,237/- and cess Rs. 17,237/- u/s 11A(2) of the Central Excise Act, 1944 and also ordered to recover interest at the appropriate rate on the total duty determined as stipulated u/s 11AB of the Central Excise Act, 1944 and also imposed penalty of Rs. 16,49,237/- on the Respondent u/s 11AC of the Central Excise Act, 1944. The Respondent paid duty amounting to Rs. 6,31,702/- and cess Rs. 4,935/- on 17-8-2000 and 13-8-2000. The Respondent preferred Appeal and the Appellate Commissioner by his order dated 19-10-2004 rejected the Appeal of the Respondent. Therefore, the Respondent preferred Appeal before the Tribunal and the Tribunal has confirmed order of the adjudicating authority and Appellate Commissioner with regard to levy of duty and interest, however, passed order reducing levy of penalty at 25% of the duty amount 2009 (238) ELT 125 (Tri.-Ahmd.)].

Mr. Oza has submitted that the Respondent has not complied with the preconditions for availment of benefit of reduced penalty under proviso to Section 11AC of the Central Excise Act, 1944 and, therefore, the impugned order of the Tribunal is liable to be set aside.

Mr. Oza further submitted that the decision of the Delhi High Court in the case of K.P. Pouches (P) Ltd. Vs. Union of India (UOI), , cannot be applied to the case of the Respondent inasmuch as in the case of K.P. Pouches (P) Ltd., (supra) the adjudicating authority has not ordered recovery of interest u/s 11AB of the Central Excise Act, 1944 because in the said case the Assessee had deposited total amount of duty payable u/s 11A(2) of the Act on the date of detection of evasion of duty itself. He has further submitted that the decision in the case of Commissioner of Central Excise Vs. Malbro Appliances P. Ltd., , also cannot be applied because the facts of the case on hand are not identical to the facts of the case of the Assessee in the Malbro Appliances P. Ltd. (supra). On the contrary, in view of settled proposition laid down by the Punjab and Haryana Court in the case of Commissioner of Central Excise Vs. Machino Montell (I) Ltd., as well as judgments of the Apex Court in the case of Union of India (UOI) Vs. Rajasthan Spinning and Weaving Mills, , Union of India (UOI) and Others Vs. Dharamendra Textile Processors and Others, and decisions of the Tribunal in the case of Jawla Steels Pvt. Ltd., reported in 2009 (238) ELT 694 (Tri.-Kolkata) and 2009 (165) ECR 219 and such other cases, the Tribunal was required to allow department to levy penalty on the Respondent for the amount equivalent to his duty liability and pass order accordingly.

Mr. Oza has further submitted that the impugned order of the Tribunal is in disregard of the law laid down by this Court in Tax Appeal No. 140 of 2008 and Special Civil Application No. 22931 of 2005 and such other judgments, which obligate upon the Tribunal to record cogent reasons in support of conclusion arrived at by him in passing the final order. In support of this submission Mr. Oza also relied on the following decisions (i) Coats Viyella India Ltd. v. Commissioner of Central Excise - 2004 (173) E.L.T. 229 (S.C) , (ii) TATA Engineering & Locomotive Co. Ltd. v. Collector of Central Excise, 2006 (203) ELT 360 (S.C), (iii) CCE, Lucknow Vs. Wimco Ltd., , (iv) Commnr. of Central Excise, N. Delhi and Others Vs. G.T.C. Industries Ltd. and Others, , (v) Commnr. of Central Excise, Bangalore Vs. Srikumar Agencies etc. etc., , (vi) Stadfast Paper Mills Vs. D.R. Kohli, Former Collector of Central Excise, Baroda and Others, .

We have considered the submissions made by Mr. Oza and also perused very minutely the order passed by the authorities below. As a matter of fact, all these questions reframed by Mr. Oza are different facets of the main question as to whether the Tribunal is justified in reducing the penalty to 25% of the duty leviable on the Respondent. All these aspects of the main question are already considered by this Court in its order dated 18-11-2009 Exotic Associates Vs. The 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 C. Ex. and Customs Vs. Rama Synsilk Mills P. Ltd., . This Court after considering the decision of Commissioner of Central Excise Vs. Malbro Appliances P. Ltd., , Union of India (UOI) and Others Vs. Dharamendra Textile Processors and Others, , Union of India (UOI) Vs. Rajasthan Spinning and Weaving Mills, . K.P. Pouches (P) Ltd. Vs. Union of India (UOI), , Commissioner of Central Excise, Rohtak v. /. 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.

However, Mr. Oza has made two more submissions in this Tax Appeal. He has emphatically stated that the Respondent has not complied with precondition 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. 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 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 issued Circular on 22-5-2008 wherein it is clarified that in all cases wherein penalty u/s 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 of hand it appears from the submissions of Mr. Oza that the entire amount has not been paid by the Respondent-Assessee and interest and/or reduced penalty of 25% were also not paid by the Respondent-Assessee. It is also apparent from the record that the adjudicating authority has not given any option to the Respondent-Assessee, we therefore direct the adjudicating authority to send a communication to Respondent-Assessee indicating therein that a particular amount of duty demanded alongwith 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 reduced penalty of 25% such amount of duty not paid so far alongwith 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 u/s 11AC equivalent to the amount of duty.

Before parting, we observe that the order passed by the Tribunal cannot be said to be a non-speaking and non-reasoned order. The authorities cited by Mr. Oza in support of his submission that a non-speaking order is passed by the Tribunal and hence it deserves to be dismissed, were duly considered by us and we are of the view that they are not applicable to the facts of the present case. The Tribunal while dismissing the Departmental Appeal observed that the quantum of the penalty is to the extent at around 25% of the duty amount and does not call for any interference. The Tribunal is taking consistent view in the matters of penalty levied u/s 11AC and when the duty amount is paid before issuance of show cause notice, the penalty is reduced to 25% of the duty amount. If the duty amount with interest is not paid in time and even reduced penalty of 25% of the duty amount is not paid in time and option is not given to the Respondent Assessee, we have taken the view that such option should be given to the Assessee and period of 30 days would commence from the date of giving such option. In this view of the matter, no interference is called for in the order of the Tribunal.

Subject to the above clarification this Tax Appeal stands dismissed.