Tribunal reduces penalty for late filing due to ignorance, from Rs. 70,000 to Rs. 5,000 per offense.

The Tribunal upheld the imposition of a penalty under Rule 27 of the Central Excise Rules for the appellant's failure to file monthly returns after switching from SSI exemption to normal duty. However, the total penalty of Rs. 70,000 was deemed excessive, and it was reduced to Rs. 5,000 for each instance of non-compliance. The Tribunal considered the appellant's argument of ignorance and previous acknowledgment by Range Officers but ultimately found the appellant in contravention of the rules. The appeal was partially allowed with a reduced penalty amount.

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Issues:
Failure to file monthly return after switching from SSI exemption to normal duty, Imposition of penalty under Rule 27 of Central Excise Rules, 2002, Quantum of penalty imposed.

Analysis:
The case involved the appellant who had been availing Small Scale Industries (SSI) exemption under Notification No. 9/2003-CE but switched to paying duty at the normal rate from 1/4/06 onwards. Despite the requirement for units paying normal duty to file monthly returns in ER-1 format, the appellant continued to file quarterly returns for about 14 months until prompted by the Department. Subsequently, the Department initiated penalty proceedings under Rule 27 of the Central Excise Rules, 2002, and imposed a total penalty of Rs. 70,000 on the appellant for failure to file monthly returns, amounting to Rs. 5,000 for each instance.

The appellant argued that the quarterly filings were due to ignorance and were acknowledged by the Range Officer without objection, leading them to believe they were compliant. The appellant contended that the penalty was too harsh and cited a Tribunal judgment to support their case. On the other hand, the Departmental Representative defended the penalty, stating that the appellant should have switched to filing monthly returns upon opting out of the SSI exemption scheme and that the penalty was justified under Rule 27 for contravention of Central Excise Rules.

Upon considering the submissions, it was established that the appellant indeed contravened Rule 12 (1) of the Central Excise Rules by filing quarterly returns instead of the required monthly returns after opting out of SSI exemption. While upholding the imposition of penalty under Rule 27, the Tribunal found the total penalty of Rs. 70,000 to be excessive. The Tribunal noted that the quarterly returns were acknowledged by Range Officers without objections and contained all necessary details. Consequently, the quantum of penalty was reduced to Rs. 5,000 for each instance of non-compliance, resulting in a partial allowance of the appeal.

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