2003 (4) TMI 371 - AT - Central Excise

Tribunal upholds penalty for exceeding exemption limit under Central Excise Rules

COMMR. OF C. EX., LUCKNOW Versus PRAGATI AROMA OIL DISTILLERS (P) LTD.

COMMR. OF C. EX., LUCKNOW Versus PRAGATI AROMA OIL DISTILLERS (P) LTD. - 2003 (157) E.L.T. 450 (Tri. - Del.) Issues:1. Appeal against setting aside penalty imposed on a company under Rule 173Q of the Central Excise Rules, 1944 for availing small scale exemption despite exceeding the value limit.Analysis:1. The Revenue appealed against the Order-in-Appeal setting aside the penalty on the company for availing small scale exemption despite exceeding the value limit. The Revenue argued that the penalty was justified under Rule 173Q as the company was aware of crossing the limit and should have paid duty before removal of goods. The Commissioner (Appeals) set aside the penalty citing lack of proof of deliberate violation or contumacious conduct by the company. The Revenue contended that the non-imposition of penalty if duty is debited before the show cause notice is incorrect, referencing Section 11A of the Central Excise Act. The insertion of Sub-Section (2B) post-May 11, 2001, and its limitations were highlighted by the Revenue.2. On the other hand, the company's representative argued that they had not violated Rule 173Q as they assessed and paid the duty before removing the goods. They emphasized that no direction was received from the Central Excise Officer under Rule 173-I to produce relevant documents for duty determination. The company promptly paid the duty upon notification of underpayment, citing precedents where penalties were not imposed if duty was voluntarily paid before the show cause notice. They also argued that penalty is not sustainable in disputes related to interpretation of notifications or assessable value calculation methods for exemption limits, citing relevant Tribunal decisions. The company further mentioned filing declarations and RT 12 returns without objection from the Range Officer.3. The Tribunal considered both arguments and noted that the company contested the penalty imposition while not disputing the duty amount. Emphasizing the primary responsibility of the assessee to pay proper duty before goods removal, the Tribunal referred to Rule 173Q, which mandates penalties for contraventions. Citing a Supreme Court judgment, the Tribunal clarified that penalties are mandatory for contraventions leading to confiscation of goods. While penalty imposition is discretionary, the amount varies case by case. Mitigating factors such as timely duty payment upon notification and lack of objections from the Department were considered. Consequently, the Tribunal directed the company to pay a nominal penalty of Rs. 5,000, balancing justice and penalty imposition based on the circumstances. The appeal was disposed of accordingly.