2005 (8) TMI 433 - AT - Central Excise

Penalty Overturned: Key Ruling on Excise Duty

The Tribunal set aside the penalty imposed on the appellant under Rule 209A of the Central Excise Rules due to the demand against M/s. BHEL being deemed ... Penalty - Imposition of, on customers-appellants for facilitation to evade duty Issues:1. Imposition of penalty under Rule 209A of the Central Excise Rules on the appellant.2. Validity of penalty imposed on the appellant for facilitating duty evasion.3. Interpretation of the Supreme Court judgment in C.C.E. v. HMM Ltd. regarding imposition of penalty.Analysis:Issue 1: The appellant filed an appeal against the adjudication order imposing a penalty of Rs. 50 lakhs under Rule 209A of the Central Excise Rules. The case involved M/s. BHEL clearing goods under an exemption without payment of duty, leading to a show cause notice for duty payment and penalty imposition. The Commissioner confirmed the duty demand and imposed penalties on M/s. BHEL and the appellant. However, the Tribunal, in Final Order No. 360/03-B, dated 23-4-2003, held the demand as time-barred and allowed the appeal filed by M/s. BHEL. The Tribunal's decision set aside the demand against M/s. BHEL, impacting the penalty imposed on the appellant.Issue 2: The adjudicating authority imposed a penalty on the appellant for allegedly facilitating duty evasion. The appellant challenged this penalty, citing the Hon'ble Supreme Court's ruling in C.C.E. v. HMM Ltd., where it was held that the question of penalty arises only if the department can sustain its demand. Since the demand against M/s. BHEL was set aside by the Tribunal in the previous order, the imposition of the penalty on the present appellant was deemed unsustainable. Consequently, the penalty imposed on the appellant was set aside, and the appeal was allowed.Issue 3: The judgment highlighted the significance of the Supreme Court's decision in C.C.E. v. HMM Ltd., emphasizing that the imposition of a penalty is contingent upon the sustenance of the demand by the department. In this case, as the demand against M/s. BHEL was overturned by the Tribunal, the imposition of the penalty on the appellant lacked a legal basis and was consequently annulled. This interpretation underscores the legal principle that penalties are intrinsically linked to the validity of the underlying demand, ensuring procedural fairness and legal compliance in penalty assessments within the excise duty framework.