Rule 25 penalty requires more than a procedural lapse; duty paid with interest led to limited penalty under Rule 27.

Penalty under Rule 25 of the Central Excise Rules, 2002 was found unsustainable where excisable goods were removed after debiting Cenvat credit instead of PLA, duty was later paid with interest, and the default did not show intent to evade duty. The Tribunal applied the principle that Rule 25 penalty requires a contravention falling within its specified clauses and involving more than a mere procedural or delayed payment lapse. It accepted that the proper penal provision was Rule 27, which allows only a limited monetary penalty, and the penalty was reduced accordingly.

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Issues: Whether penalty was sustainable under Rule 25 of the Central Excise Rules, 2002 for removal of goods after debiting Cenvat credit instead of PLA and delayed payment of duty, and whether the penalty was liable to be restricted to the maximum prescribed under Rule 27.

Analysis: The liability arose from removal of excisable goods during a short period against Cenvat credit instead of PLA, followed by payment of duty with interest. The Tribunal relied on the principle that Rule 25 penalty is not attracted unless the contravention falls within the specified clauses and indicates more than a mere delayed or procedural default. Since the duty and interest had been paid and the default did not establish an intention to evade duty, the penalty under Rule 25 could not be sustained. The Tribunal further accepted that the appropriate penal provision was Rule 27, which permits only a limited monetary penalty.

Conclusion: Penalty under Rule 25 of the Central Excise Rules, 2002 was held unsustainable, and the penalty was reduced to Rs. 5,000 under Rule 27 of the Central Excise Rules, 2002.

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