CESTAT Sets Aside Order as Confiscation and Penalties Unsustainable Once Duty and Penalty Paid u/s 11AC(1)(d) [Read Order]

The assessee-appellant, Silver Rose Overseas Pvt. Ltd., was engaged in the manufacture of various types of bags and kites, but it was not registered with the department or paid the central excise duty.

The case arose from a visit by the officers of the Central Excise Department to the factory premises of the assessee, where shortages of finished goods and inputs were detected on verification of stock.

The Ultimate GST Casebook! Every professional needs this! Click here

The department alleged that the shortages were due to clandestine removal of excisable goods without payment of duty. Based on this, a Show Cause Notice (SCN) was issued proposing the demand of duty, interest, and penalties under Sections 11A(4), 11AC, and Rule 25 of the Central Excise Rules, 2002, along with confiscation of goods and penalties on the company’s directors, Manoj Bajaj and Manish Bajaj, under Rule 26.

Also Read: Issue on Penalties u/s11AC of Central Excise Act Fails to decide based on decision by Supreme Courton same issue: CESTAT directs Re adjudication

During the course of proceedings, the appellant company deposited the entire amount of duty, interest, and penalty as prescribed under Section 11AC(1)(d) of the Act.

Despite this, the adjudicating authority passed an order confirming the demand, ordering confiscation of goods, and imposing separate penalties on the directors. The Commissioner (Appeals) upheld the adjudication order, leading the appellants to approach the Tribunal.

Before the Tribunal, the appellants argued that in terms of Section 11AC(1)(d), once the assessee pays duty, interest, and penalty within thirty days of issuance of the SCN, all proceedings in respect of the said notice stand concluded.

The Revenue contended that confiscation and penalties were separately justified under the rules as the shortages were detected during physical verification, implying intent to evade duty.

New to GST? This book is your shortcut to expertise! Click here

The Bench comprising Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) observed that the appellants had made payment of the entire duty, interest, and penalty within the prescribed time and that the adjudicating authority had not disputed this fact.

The Tribunal referred to the provisions of Section 11AC(1)(d), which clearly state that payment of such dues within thirty days of the SCN results in deemed closure of the proceedings.

Also Read: Pre-SCN PenaltyDeposit Can’t Be Reappropriated as Duty: CESTAT Upholds ₹5.32 Crore Excise DutyDemand

The Bench further held that once the proceedings are concluded by operation of law, the authorities are not empowered to impose any additional penalties or confiscate goods arising from the same cause of action. The Tribunal found that the Commissioner (Appeals) had failed to appreciate this statutory mandate and, therefore, the impugned order was not sustainable.

Accordingly, the CESTAT set aside the order passed by the Commissioner (Appeals) and held that the confiscation of goods and penalties imposed on the assessee and its directors were unsustainable, as the matter stood concluded upon payment of duty, interest, and penalty under Section 11AC(1)(d) of the Central Excise Act, 1944.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates