Tribunal restores penalty for non-payment of central excise duty by steel ingot manufacturers

The Tribunal set aside the Commissioner (Appeals)'s order reducing the penalty for non-payment of central excise duty by steel ingot manufacturers. The penalty imposed by the adjudicating authority under Rule 25 of the Central Excise Rules, 2002, was upheld, as the assessees' retention of collected duty until the show cause notice indicated an intention to evade payment. The department's appeal was allowed, restoring the original penalty amount.

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Issues Involved:
1. Non-payment of central excise duty.
2. Imposition of penalty under Rule 25 of the Central Excise Rules, 2002.
3. Reduction of penalty by the Commissioner (Appeals).

Issue-wise Detailed Analysis:

1. Non-payment of Central Excise Duty:
The assessees, manufacturers of steel ingots, failed to discharge their duty liability for the second fortnight of December 2002 and January 2003 by the due dates (5th January and 5th February respectively). The total defaulted amount was Rs. 10,30,959/-, which was collected from buyers but not paid to the government. A show cause notice was issued on 30-12-2003. The assessees argued that financial difficulties led to the delay, and they eventually paid the duty on 9-3-2004 and interest on 18-3-2004.

2. Imposition of Penalty under Rule 25:
The adjudicating authority confirmed the demand and imposed an equal amount of penalty under Rule 25 of the Central Excise Rules, 2002. The assessees contested the penalty, arguing that there was no specific mention of any clauses of Rule 25 in the show cause notice and no intention to evade duty, as evidenced by the payment of duty and interest after the notice. The department argued that the assessees collected the duty from buyers but did not pay it to the government, indicating an intention to evade payment.

3. Reduction of Penalty by the Commissioner (Appeals):
The Commissioner (Appeals) reduced the penalty to Rs. 10,000/-, stating that the assessees were not responsible for the delay in duty payment before 1-4-2004 and had paid the duty with interest after the show cause notice. The department challenged this reduction, asserting that the assessees' retention of the duty amount collected from buyers until the issuance of the show cause notice indicated an intention to evade duty.

Findings:
The Tribunal found that the assessees were aware of their duty payment obligations and retained the collected duty amount until the show cause notice was issued, indicating an intention to evade payment. The show cause notice adequately disclosed the basic facts and the intention to evade duty, justifying the penalty under Rule 25(d). The Commissioner (Appeals)'s reduction of the penalty was based on extraneous grounds unrelated to the business activities during the default period. The Tribunal concluded that the reduction of the penalty was unjustified.

Conclusion:
The Tribunal set aside the order of the Commissioner (Appeals) reducing the penalty and restored the order of the adjudicating authority, which imposed an equal amount of penalty as the defaulted duty. The appeal by the department was allowed, and the appeal by the assessee was dismissed.

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