Commissioner of Central Excise vs Alsthom Instrument Transformers

N. Kumar, J—In all these appeals, a common question of law is involved. Therefore, they are taken up together for consideration and disposed of by this common order. The question involved is, "whether the assessee is liable to pay interest and penalty in respect of the duty paid prior to the issue of a show cause notice to payment made after the due date?" Both the Appellate Authority and the Tribunal relying on the earlier judgments, held that it is settled law that once the duty is paid prior to the issue of show cause notice, no interest and no penalty is liable to be paid. The said order was upheld by this Court.

The Revenue preferred an appeal to the Apex Court. The Apex Court in the case of Union of India (UOI) and Others Vs. Dharamendra Textile Processors and Others, (2008) 219 CTR 617 : (2008) 133 ECC 247 : (2008) 159 ECR 247 : (2008) 231 ELT 3 : (2008) 306 ITR 277 : (2008) 11 JT 255 : (2008) 13 SCALE 233 : (2008) 13 SCC 369 : (2008) 174 TAXMAN 571 : (2009) 11 Vat Reporter 63 : (2008) 18 VST 180 hearing of batch of appeals from all over the country, where the payment of penalty was involved, has held that when once the condition stipulated in Section 11AC is established, imposition of penalty is automatic. There is no scope for any discretion. The levy of penalty is mandatory. After laying down the said law, the judgments of the High Court were set-aside and the matters were remanded back to the High Court for fresh disposal in the light of the aforesaid judgment. After the judgment in Dharamendra''s case, in almost every case relating to penalty, the Revenue was contending that the Apex Court has laid down that in every case of non-payment or short payment of duty, the penalty clause get automatically attracted and the authority has no discretion in the matter.

Further, the Apex Court in the case of Union of India (UOI) Vs. Rajasthan Spinning and Weaving Mills, (2009) 224 CTR 1 : (2009) 165 ECR 93 : (2009) 238 ELT 3 : (2009) 7 JT 314 : (2009) 8 SCALE 231 : (2009) 13 SCC 448 : (2009) 10 SCR 58 : (2009) 20 STT 481 : (2009) 180 TAXMAN 609 : (2009) 4 UJ 1637 : (2009) 11 Vat Reporter 210 , after examining the law laid down by the Apex Court in Dharamendra Textiles case held that they failed to see how the decision in Dharamendra Textiles'' case can be said to hold that Section 11AC of the Act would apply to every case of non-payment or short payment of duty regardless of the conditions expressly mentioned in the Section for its application. Further, they held that the decision in Dharmendra Textiles'' case must therefore, be understood to mean that though the application of Section 11AC of the Act would depend upon the existence or otherwise of the conditions expressly stated in the Section, once the Section is applicable in a case, the concerned authority would have no discretion in quantifying the amount of penalty. It must be imposed equal to the duty determined under sub-section (2) of Section 11 of the Act. Therefore, imposition of penalty is not automatic. Only if the conditions prescribed in Section 11AC of the Act is fulfilled, then there is no discretion left with the authority except imposing penalty.

In the light of the aforesaid judgment, the finding recorded by the Appellate Authorities in this case that once the duty is paid before issue of show cause notice, no penalty is leviable cannot be sustained. Accordingly, that portion of the order setting aside the imposition of penalty is hereby set-aside. The matter is remitted back to the original authority to consider the leviability of penalty in the light of the statutory provisions contained under Section 11AC of the Act and the interpretation by the Apex Court in the aforesaid two judgments in accordance with law.

Insofar as the payment of interest is concerned, in view of Sections 11AA and 11AB of the Act, the payment of interest has become automatic. However, the question which arises for consideration is, "what is the rate of interest to be charged?" That depends upon the notification issued from time to time. Therefore, the matter is remanded back to the original authority to decide the rate of interest leviable for these delayed payments irrespective of the reason for the delay in payment of duty.

Insofar as CSTA No. 7/2005 is concerned, penalty was imposed, both on the Company as well as the Directors. The lower Appellate Authority and the Tribunal has set-aside the imposition of penalty on Directors. Though the Revenue preferred an appeal against that portion of the order setting-aside the penalty on the ground that it is not leviable, they did not choose to challenge that portion of the order setting-aside levy of penalty on Directors. That portion of the order has become final now. Though the matter is remanded back to the original authority to consider the payment of duty, they shall confine their enquiry only insofar as levy of penalty insofar as the company is concerned and not against the Directors. Hence, we passed the following order:

"(a) All the appeals are allowed.

(b) Matters are remitted back to the original authority for passing appropriate orders in the light of the observations made in this case and also the observations made in the judgments of the Apex Court referred to in the order."