Commr. of Cus. and C. Ex., Noida vs Supreme Industries Ltd.

Heard Sri Praveen Kumar, learned Counsel for the appellant, and Sri Rajiv Joshi for the respondent.

This appeal was admitted on following substantial question of law :-

(i) Whether the penalty under Section 11AC is liable to be imposed on assessee and interest under Section 11AB can be levied in view of Explanation-1 of the said sub-section (2B) of Section 11A, where duty has been deposited before issue of show cause notice?

It is not disputed that assessee admitted liability of payment of duty and deposited requisite amount on 7-2-2003 while show cause notice was issued on 4-4-2003 proposing to impose penalty under Section 11AC and under Section 11AB of Central Excise Act but this has been set aside by Customs, Excise and Service Tax Appellate Tribunal holding that the petitioner did not intend to defy duty demanded by Tribunal hence penalty is not justified.

We find that there is a consensus in various High Courts as also various Benches of High Courts that if disputed duty is paid by an assessee before a show cause notice proposing penalty under Section 11AC and interest under Section 11AB is issued, this would show that there was no question of any fraud, mis-representation or suppression of fact hence penalty and interest should not be levied. In Rashtriya Ispat Nigam Ltd. v. Commissioner of Central Excise, Visakhapatnam, 2003 (161) E.L.T. 285 (Tri. - Bang.), took this view. The department preferred appeal in Supreme Court and vide judgment dated 7-5-2003, appeals are dismissed and judgment is reported in Commissioner v. Rashtriya Ispat Nigam Ltd. 2004 (163) E.L.T. A53 (S.C.). Thereafter, Madras High Court in Commissioner v. Kjon Engineering (P) Ltd., 2005 (67) RLT 157, Karnataka High Court in Commissioner, Central Excise, Mangalore v. Shree Krishna Pipe Industries, 2004 (165) E.L.T. 508, Bombay High Court in Commissioner of Central Excise-I v. Gaurav Mercantiles Ltd., 2005 (129) ECR 386 : 2005 (190) E.L.T. 11 (Bom.) and Rajasthan High Court in Union of India and Others v. T.P.L. Industries Ltd., 2007 (214) E.L.T. 506, have taken the same view.

Confronted with the aforesaid authorities, learned Counsel for appellant could not dispute the above position and also neither could place any other authority taking a different view so as to persuade us to take a different view nor could advance any other argument justifying penalty and interest under aforesaid provision even when the assessee admitting disputed liability, has deposited the same even before issuing of a show cause notice under the aforesaid provision.

In view of above, aforesaid substantial question of law is answered against Revenue and in favour of assessee. We uphold the view taken by Tribunal that neither any penalty nor interest under Section 11AC and under Section 11AB respectively was payable by assessee when it has deposited disputed duty voluntarily before issuing of notice under Sections 11AC and 11AB.

The appeal, therefore, lacks merit and is dismissed.