Rule 25 penalty requires intent to evade duty; recorded clearances and later credit reversal defeated suppression.

Penalty under Rule 25 of the Central Excise Rules, 2002 was held unsustainable where exempted goods were cleared without initial reversal of Cenvat credit, because the clearance was duly recorded and the discrepancy was found on scrutiny of records. On those facts, suppression of facts with intent to evade duty was not established, and the condition in Rule 25(1)(d) requiring contravention with intent to evade duty was absent. The penalty was therefore set aside.

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Issues: Whether penalty under Rule 25 of the Central Excise Rules, 2002 was sustainable where exempted goods were cleared without reversing Cenvat credit and the amount was subsequently reversed.

Analysis: The appellant's clearance of exempted goods was reflected in the records, and the alleged irregularity was detected on scrutiny of those records. On these facts, the element of suppression of facts with intent to evade payment of duty was not established. Since Clause (d) of sub-rule (1) of Rule 25 authorises penalty only for contravention with intent to evade duty, the statutory condition for penalty was absent.

Conclusion: Penalty under Rule 25 of the Central Excise Rules, 2002 was not justified and was set aside in favour of the appellant.

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