Commissioner of Central Excise vs Ruchira Papers Ltd.

Deepak Gupta, J.—This appeal has been admitted on the following substantial question of law:

Whether interest and penalty is imposable even if C.E duty has been deposited by the assessee before Show Cause Notice in case where the said duties deposited not voluntarily but on detection by the department.

At the outset we may state that in CEA No. 9 of 2006 titled Commissioner of Central Excise, Chandigarh v. Him Chemicals and Fertilizers Ltd. the identical question of law was involved and we had decided the case in favour of the revenue. This Court on a conjoint reading of Section 11AC of the Act held that penalty can be imposed even if the excise duty is deposited at the threshold before the issuance of show cause notice.

The facts of the present case are that the preventive staff of the Central Excise Commissionerate, Chandigarh visited the factory premises of the assessee on 11.9.2003. It was found that raw material i.e. Caustic Soda lye was only weighing 28.392 MT whereas as per the books it should have been 49.492 MT. Consequently, there was shortage of 21.100 MT valued at Rs. 2,90,456/- involving Central Excise duty of Rs. 46,473/-. Sh. Randhir Singh, Authorized Signatory of the firm stated that shortage could have occurred due to the leakage of the raw material but could not give exact reason for this shortage. On the next day itself the assessee deposited Rs. 46,473/-.

A show cause notice was issued by the Assessing Authority and penalty i.e. Rs. 46,473/- was levied u/s 11AC. The assessee filed an appeal and the appeal was allowed only on the ground that since the assessee had deposited the amount before the issuance of the show cause notice no penalty could have been imposed. The Tribunal also dismissed the appeal of the Revenue on the same ground.

As already stated above, we have already taken a view that u/s 11AC of the Act penalty can be imposed even if the amount of excise is deposited before the issuance of show cause notice. Section 11AC of the Excise Act reads as follows:

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 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 11-A, 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 u/s 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.

A bare perusal of the above provision shows that the said provision incorporates liability to pay penalty where the excise has not been paid or short paid or erroneously refunded on account of fraud, collusion, willful misstatement or suppression of facts or contravention of any of the provisions of the Act or Rules made there under with intent to evade payment of duty. Mere deposit of the amount prior to issuance of show cause notice will not negate the provisions of Section 11 AC.

Faced with this situation Sh. Rahul Mahajan, learned Counsel for the respondent has urged that both the Commissioner as well as Appellate Tribunal have not gone into the question as to whether the case fell within the purview of Section 11AC and other corresponding provisions of the Act.

The question as to whether penalty should be imposed or not is a question of fact. Since this question has not been determined by the Commissioner (Appeals) or the Tribunal whose decisions are based only on the consideration that the excise duty was deposited prior to the issuance of the show cause notice, we set-aside the orders of the Commissioner (Appeals) and the Tribunal and remand the case back to the Commissioner (Appeals) for fresh decision on the issue of penalty after determining the question whether the non-payment of duty in the present case was on account of fraud, collision or any willful mis-representation or suppression of facts or contravention of any of the provisions of the Excise Act or the Rules made there under with intention to evade payment of duty as laid down u/s 11AC.

The appeal is disposed of in the aforesaid terms. No costs.