IMPORTANT POINT
Thus application of section 11AC would depend upon existence or otherwise of the conditions expressly stated in the section. However, once the section is applicable in a case, concerned authority would have no discretion in imposing penalty. Once the section applies, the authorities have to quantify the amount of penalty and impose it.

Judgment :

AFTAB ALAM, J.

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 Vs. Dharamendra Textile Processors, 2008 (231) ELT 3 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.

4. In the appeal arising from SLP (C) No.15927/2007 the respondent- assessee is a manufacturer of P/V yarn. On July 12, 2000 the Preventive Party of Central Excise Division, Udaipur visited the assessees factory premises and on scrutiny of its internal records took the view that in clearances of goods on ex-mill sales there was short payment of duty by Rs.1,09,682.00 and by Rs.69,900.00 on sales made from the assessees depot. The short payment of duty, according to the Revenue, took place in the following circumstances. The assessee was collecting handling and forwarding charges at the rate of Rs.6.00 per bag/ carton up to October, 1996 and after that at the rate of Rs.8/-. The amount of handling and forwarding charges was shown in the invoices separately from the assessable value of the goods. During the material time the assessee had collected a sum of Rs.7,46,219.00 as handling and forwarding charges on its sales from the mill. The assessee paid duty only on the difference between the amount collected by it and the actual expenditure incurred on loading and handling of goods within the factory. In this way a sum of Rs.5, 59,603.00 was left out of reckoning for levy of excise duty. The excise duty on the aforesaid sum came to Rs.1, 09,682.00. In the same manner there was short payment of duty amounting to Rs.69, 900.00 on sales made from the assessees depot.

5. On the aforesaid facts the Additional Commissioner, Central Excise, Jaipur issued a show cause notice to the assessee on March 27, 2001. In the notice it was expressly acknowledged that on being pointed out the assessee deposited the full amount of duty (that is, Rs.1,09,682.00 + Rs.69,900.00) on August 26, 2000. Nevertheless, the notice went on to say that with effect from October 1, 1996 the requirement to submit the invoices to the Central Excise department was dispensed with and the assessee had discontinued submitting its invoices to the concerned authorities. This resulted into suppression of material facts on its part that the handling and forwarding charges were not being added on to the assessable value of the goods. The Additional Commissioner, therefore, invoked the provision of penalty as well. The assessee filed its show cause against imposition of penalty but the Joint Commissioner by his order dated September 26, 2001 not only confirmed the demand of duty (that was already deposited by the assessee) but also imposed penalty amounting to Rs.1,79,522/-under section 11AC of the Act. On appeal, however, the Tribunal set aside the imposition