2005 (4) TMI 501 - AT - Central Excise

Tribunal overturns penalty for two-wheeler manufacturers in duty dispute, highlighting importance of procedure compliance

The Appellate Tribunal CESTAT, NEW DELHI set aside a penalty of Rs. 50,000 imposed under Rule 209A on appellants involved in manufacturing two-wheelers ... Penalty Issues: Imposition of penalty under Rule 209AAnalysis:The judgment by the Appellate Tribunal CESTAT, NEW DELHI dealt with the contested imposition of a penalty of Rs. 50,000 under Rule 209A. The appellants, engaged in the manufacture of two-wheelers and parts, had sent parts to a job worker who faced duty demands for scrap generated during machining. A similar demand was raised against the appellants, stating that if duty was not recoverable from the job worker, it would be payable by the appellants due to alleged duty evasion. However, the job worker settled the duty liability before the Settlement Commission, resulting in no duty demand confirmed against the appellants.The Tribunal emphasized that the provisions of Rule 209A could not be invoked against the appellants. The duty demand in the show cause notice was based on the job worker's failure to pay duty on the scrap, with no evidence suggesting the appellants abetted duty evasion. The appellants followed the prescribed procedure under Rule 57F for job work and paid charges without involvement in any illegality or irregularity. As a result, the Tribunal set aside the penalty imposed under Rule 209A, allowing the appeal of the appellants with consequential relief as per law.This judgment highlights the importance of establishing direct involvement or abetment in duty evasion to invoke penalties under specific rules. It underscores the significance of following prescribed procedures and fulfilling obligations in transactions to avoid unwarranted penalties. The decision provides clarity on the application of penalty provisions and the necessity of concrete evidence to attribute liability accurately in duty-related matters.