2010 (5) TMI 462 - AT - Central Excise

Appellate Tribunal upholds duty demand but cancels penalty due to genuine mistake in exchange rate application.

The Appellate Tribunal confirmed the demand for duty but set aside the penalty imposed on the appellant, considering the mistake in applying the incorrect ... Penalty – Bona fide mistake – EOU, DTA clearance against foreign exchange - appellants applied conversion rate, as was available in the previous notification as against correct conversion rate in terms of Notification No. 68/2003-Cus - goods having been cleared on proper invoice, this lapse cannot be attributed to any mala fide so as to invoke any penal provision against the appellant – Penalty aside Issues:1. Calculation of Central Excise duty based on incorrect exchange rate.2. Imposition of penalty under Rule 25(1) of Central Excise Rules, 2002.Analysis:Issue 1: Calculation of Central Excise duty based on incorrect exchange rateThe appellants, engaged in manufacturing Made-ups falling under Chapter 62 of CETA, 1985, cleared consignments against foreign exchange from an EEFC account. The show cause notice alleged that the appellants calculated the value of clearances using an incorrect exchange rate, resulting in short payment of duty. The demand for short paid duty of Rs. 25,120 was raised, and the adjudicating authority confirmed this demand along with imposing a penalty under Rule 25(1) of the Central Excise Rules, 2002.Analysis of Judgment:The learned advocate for the appellant did not dispute the duty confirmation but argued that the short payment was due to a genuine mistake in applying the correct exchange rate. The Tribunal, after hearing the arguments, confirmed the duty demand as uncontested. However, regarding the imposition of penalty, the Tribunal noted that the mistake was not deliberate but a bona fide error made by the appellants. The Tribunal acknowledged that the incorrect rate was applied based on a previous notification and not with any malicious intent. Since the goods were cleared on proper invoices, the Tribunal concluded that the penalty was unwarranted, and the mistake did not merit penal provisions against the appellant.Issue 2: Imposition of penalty under Rule 25(1) of Central Excise Rules, 2002The order passed by the original adjudicating authority upheld the imposition of a penalty under Rule 25(1) of the Central Excise Rules, 2002, along with confirming the demand for short paid duty. However, the Tribunal, after considering the arguments presented, set aside the penalty imposed on the appellant. The Tribunal concluded that the penalty was not justified as the mistake in applying the incorrect exchange rate was unintentional and did not involve any fraudulent intent.Conclusion:In conclusion, the Appellate Tribunal confirmed the demand for duty but set aside the penalty imposed on the appellant, considering the mistake in applying the incorrect exchange rate as a bona fide error. The appeal was disposed of with the decision to uphold the duty demand while relieving the appellant of the penalty.