Imposition of mandatory penalty equal to duty under Section 11AC even though duty is paid before the issue of Show Cause Notice – Board circulates Supreme Court Order
The L&J wing of the CBEC is apparently very strong. They have communicated to the field on 21 st May, a decision of the Supreme Court delivered on 12 th May!
Board communicates that the Supreme Court in case of U.O.I Vs. Rajasthan Spinning & Weaving Mills and Commissioner of Customs & Central Excise Vs. Lanco Industries Ltd [] had clarified that when the conditions spelled out under Section 11AC of the Central Excise Act, 1944 are fulfilled, there is no discretion to reduce the mandatory penalty equal to duty even though the duty is paid before the issue of Show Cause Notice.
Of course the Supreme Court had also said that in almost every case relating to penalty, the decision [D haramendra Textile Processors - ] is referred to on behalf of the Revenue as if it laid down that in every case of non-payment or short payment of duty the penalty clause would automatically get attracted and the authority had no discretion in the matter.
Fair enough, they can close their eyes to views against them.
It is final that when conditions under Section 11AC are fulfilled, there is no escape from mandatory equal penalty, irrespective of when the duty is paid. What has conveniently not been told to the Supreme Court by the Revenue is that there is hardly any Show Cause Notice without invoking Section 11AC . To start with, nobody in the department will or can issue a Show Cause Notice within the normal limitation period of one year – so invariably the ingredients of Section 11AC are invoked and routinely confirmed. In fact many assessees are coerced/requested not to raise the limitation issue while defending SCNs on the ground that action will be initiated against lower level officers. Adjudication and Appellate Authorities of the Department will never pass an order against Revenue on the question of limitation.
So it is always Section 11AC and always mandatory penalty!
But the Board deserves all praise for acting at the speed of light. It is heartening to note that there are officers in the Board who read Court judgements and react to them. This will greatly improve conditions for both officers and assessees.
CBEC Circular NO. 889/09/2009- CX ., Dated: May 21, 2009