LexUNION OF INDIA versus M/S. RAJASTHAN SPINNING AND WEAVING MILLS
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A B [2009] 9 S.C.R. 58 UNION OF INDIA v. M/S. RAJASTHAN SPINNING AND WEAVING MILLS (Civil Appeal No. 3527 of 2009) MAY 12, 2009 [S.H. KAPADIA AND AFTAB ALAM, JJ.] Central Excise Act - s.11AC - Penalty for short levy or non-levy of duty - Conditions and circumstances that would C attract imposition of such penalty -Decision of Supreme Court in Dharamendra Textile case - Interpretation of - Held: Penalty under s.11AC is punishment for act of deliberate deception by assessee with intent to evade duty by adopting any of the means mentioned in the section - Though D application of s. 11 AC would Jepend upon existence or otherwise of 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 and penalty must be imposed equal to the duty determined under E sub-section (2) of s.11A. F The issue regarding the conditions and the circumstances that would attract imposition of penalty under section 11 AC of the Central Excise Act arose for consideration in the present appeals. The Tribunal, by the impugned judgment, took the view that there was no warrant for levy of penalty since the respondent-assessees had deposited the balance amount of excise duty (that was short paid at the first G instance) even before the show cause notice was issued. H , In appeals to this Court, the Revenue contended relying upon a recent decision of this Court in Oharamendra Textile* that mere non-payment or short 58 •• -> UNION OF INDIA v. RAJASTHAN SPINNING AND 59 WEAVING MILLS l payment of duty would inevitably lead to imposition of A .,... penalty equal to the amount by which duty was short I paid. Allowing the appeals, the Court HELD:1.1. The reason assigned by the Tribunal to B strike down the levy of penalty against the assessees is as misconceived as. the interpretation of Dharmendra Textile is misconstrued by the Revenue. One completely fails to see how payment of the differential duty, whether before or after the show cause notice is issued, can alter c the liability for penalty, the conditions for which are clearly spelled out in Section 11AC of the Central Excise Act. -· [Para 2] [62-A-B] 1.2. The main body of Section 11AC lays down the D conditions and circumstanc">S that would attract penalty and the various provisos enumerate the conditions, subject to which and the extent to which the penalty may be reduced. The penalty provision of section 11AC would come· into play only after an order is passed t:1nder E' section 11A(2) with the finding that the escaped duty was the result of deception by the assessee by adopting a 't means as indicated in section 11AC. Penalty under ~ section 11AC is punishment for an act of deliberate deception by the assessee with the intent to evade duty F by adopting any of the means mentioned in the section. [Paras 17, 18 and 19] [75-F; 76-C-E] 1.3. In almost every case relating to penalty, the decision of this Court in Dharamendra Textile is referred to on behalf of the Revenue as if it laid down that in every GI _,,,.. 4 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. There is no reason to understand or read the said decision in that H 60 SUPREME COURT REPORTS [2009] 9 S.C.R. A manner. The decision in Oharamendra Textile cannot be ~· said to hold that section 11AC 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. [Paras 20 and 21] [76-E; 78-D-E] B 1..4. The decision in Dharamendra Textile must be understood to mean that though the application of ,... section 11 AC would depend upon, the existence or otherwise of the conditions expressly state~ in the c section, once the section is applicable in a case the concerned authority would have no discretion in quantifying the amount and penalty must be imposed equal to the duty determined under sub-section (2) of .... section 11 A. That is what Oharamendra Textile decides. D [Para 23] [79-E-F] *Union of India v. Oharam&ndra Textile Processors, 2008 (231) ELT 3, explained. Cosmic Dye Chemical v. Collector of Central Excise E (1995) 75 ELT 721 and Continental Foundation Jt. Venture v. Commissioner of Central Excise, (2007) 216 ELT 177, referred to.
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