UNION OF INDIA Vs. RAJASTHAN SPINNING AND WEAVING MILLS

JUDGEMENT

(1.) Leave granted in both the SLPs.

(2.) What are the conditions and the circumstances that would attract the imposition of penalty under Section 11AC of the Central Excise Act (The Act , hereinafter) In the two cases before us the Tribunal has taken the view that there was no warrant for levy of penalty since the assessees had deposited the balance amount of excise duty (that was short paid at the first instance) even before the show cause notice was issued. On the other hand, on behalf of the Revenue, the appellants in the two appeals, it was contended, relying upon a recent decision of this Court in Union of India v. Dharamendra Textile Processors that mere non payment or short payment of duty (without anything else!) would inevitably lead to imposition of penalty equal to the amount by which duty was short paid. In our view the reason assigned by the Tribunal to strike down the levy of penalty against the assessees is as misconceived as the interpretation of Dharamendra Textile is misconstrued by the Revenue. We completely fail to see how payment of the differential duty, whether before or after the show cause notice is issued, can alter the liability for penalty, the conditions for which are clearly spelled out in Section 11AC of the Act.

(3.) Though both the appeals turn on a question of law, it would be nevertheless useful to take a brief look at the facts of the two cases.