Government of India
Ministry of Finance
Department of Revenue
(Central Board of Excise & Customs)
Legal Section
New Delhi, the 21st May, 2009.
Circular No.889/09/2009-CX
Subject: Imposition of mandatory penalty equal to duty under Section 11AC even
though duty is paid before the issue of Show Cause Notice. Supreme Court’s
judgement dated 12th May, 2009 in the case of U.O.I Vs. Rajasthan Spinning &
Weaving Mills and Commissioner of Customs & Central Excise Vs. Lanco Industries
Ltd. in Civil Appeal No.3525 of 2009 arising out of S.L.P (Civil) No.4078 of
2008.
The Hon’ble Supreme Court in the case of Union of India Vs. Dharmendra Textile
Processors and other enjoined matters 2008 (231) E.L.T. 3 (S.C.) by its
pronouncement of the rule has laid the question of applicability of equal
penalty under Section 11AC of the Central Excise Act, 1944 at rest. It has
categorically opined that the penalty prescribed in Section 11AC is mandatory in
nature and it is a civil liability.
- After the pronouncement of the said judgement, references have been received
in the Board questioning the applicability of the said judgement to the cases
where the duty has been paid prior to the issue of Show Cause Notice. In this
regard, I am to invite your attention to the judgement of Hon’ble Supreme Court
in the case of U.O.I Vs. Rajasthan Spinning & Weaving Mills and Commissioner of
Customs & Central Excise Vs. Lanco Industries Ltd. in Civil Appeal No.3525 of
2009 arising out of S.L.P (Civil) No.4078 of 2008 (copy enclosed) wherein it has
been 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.
- This is an important judgment in favour of Revenue and steps be taken to
circulate it and bring to the knowledge of field formations as well as in the
notice of Tribunals and Courts where similar cases are pending.
- This issues with the approval of Member (L & J).
(M.D Singh)
Commissioner (L & J)
Tel No.26161042
F.No.275/40/2009-CX.8A