2014 (3) TMI 450 - AT - Central Excise

Court decision emphasizes intent in excise duty penalties

The court ruled that the penalty under Rule 25 of the Central Excise Rules, 2002 was impermissible as there was no intent to evade duty, despite the ... Penalty under Rule 25 of the Central Excise Rules, 2002 - Contravention of Rule 8 (3A) of the Central Excise Rules - Failure to pay their excise duty within 30 days - Utilization of CENVAT Credit - Held that:- although the appellant has contravened the provisions of Rule 8(3A) of the Central Excise Rules, 2002, but the intent to evade payment of duty is missing. Therefore, the provisions of Section 11AC of the Central Excise Act are not reflected. Accordingly, penalty under Rule 25 of the Central Excise Rules is not permissible, but penalty under Rule 27 of the Rules is to be imposed. As the appellant has contravened the provisions of Rule 8(3A), therefore, following the decision of Solar Chemferts (2011 (6) TMI 640 - CESTAT, MUMBAI), I impose penalty of Rs. 5,000/- each on the appellants - Decided against assessee. Issues involved:1. Imposition of penalty for contravention of Rule 8(3A) of the Central Excise Rules under Rule 25 of the Central Excise Rules, 2002.2. Applicability of penalty under Rule 25 of the Central Excise Rules, 2002 in the absence of contravention of Section 11AC of the Central Excise Act.3. Consideration of penalty under Rule 27 of the Central Excise Rules.Analysis:Issue 1: Imposition of penalty under Rule 25 for contravention of Rule 8(3A)The judgment addresses the imposition of a penalty of Rs. 9,93,558/- on the appellant for contravening Rule 8(3A) of the Central Excise Rules. The appellant failed to pay excise duty within the stipulated time frame and utilized their cenvat credit account for payment, contrary to the requirement of Rule 8(3A). Consequently, the penalty under Rule 25 of the Central Excise Rules, 2002 was confirmed against the appellant, equivalent to the duty amount.Issue 2: Applicability of penalty under Rule 25 without contravention of Section 11ACThe appellant argued that since there was no contravention of Section 11AC of the Central Excise Act, the penalty under Rule 25 of the Central Excise Rules, 2002 should not apply for the violation of Rule 8(3A). The appellant cited precedents, including the case of Solar Chemferts Pvt. Ltd. vs. CCE, Thane, to support this contention. However, the opposing party contended that the contravention of Rule 8(3A) warranted the penalty under Rule 25. The judgment considered this argument but concluded that the intent to evade duty, as required by Section 11AC, was absent in this case. Therefore, the penalty under Rule 25 was deemed impermissible.Issue 3: Consideration of penalty under Rule 27In light of the above analysis, the judgment determined that while the appellant had contravened Rule 8(3A) of the Central Excise Rules, the absence of intent to evade payment of duty precluded the applicability of penalty under Rule 25. Instead, the judgment imposed a penalty under Rule 27 of the Rules, citing the decision of Solar Chemferts. Consequently, a penalty of Rs. 5,000/- each was imposed on the appellants, and the appeals were disposed of along with stay applications.This judgment clarifies the nuanced application of penalties under different rules based on the specific circumstances of a case, emphasizing the importance of intent and compliance with relevant provisions.