2012 (9) TMI 862 - AT - Central Excise

Appellate tribunal affirms Rs. 5,000 penalty for Central Excise Rules violation. Penalties should be deterrent, not punitive.

The appellate tribunal upheld the penalty of Rs. 5,000/- on the respondents for contravening the Central Excise Rules by not depositing duty through ... Penalty under Rule 27 of the Central Excise Rules, 2002 - single maximum penalty - no transaction-wise multiplicity of penalty - procedural lapse without loss of revenue - deterrent rather than punitive object of penaltyPenalty under Rule 27 of the Central Excise Rules, 2002 - single maximum penalty - no transaction-wise multiplicity of penalty - procedural lapse without loss of revenue - Validity and quantum of the penalty imposed under Rule 27 for depositing duty from PLA instead of e-payment and whether the penalty could be imposed transaction-wise or only as a single maximum amount. - HELD THAT: - The Tribunal recorded that the respondents deposited duty from their PLA instead of by e-payment, which led to initiation of proceedings and imposition of a penalty under Rule 27. The Commissioner (Appeals) found that Rule 27 provides for a maximum penalty of Rs. 5,000 and that the Revenue's contention that this amount must be imposed for each breach or transaction is not correct. The appellate authority treated the contravention as a recurring procedural lapse arising from difficulties with the e-payment facility (delay by the bank) and noted absence of any loss of revenue. In that factual and legal matrix, a single maximum penalty of Rs. 5,000 was held to be justified on a deterrent basis rather than by multiplying the penalty transaction-wise or manufacture-wise. The Tribunal, after hearing the Revenue and noting that no reasonable ground was advanced to enhance the penalty, affirmed the view that there is no provision permitting imposition of the penalty on a transaction-wise basis and rejected the Revenue's appeal. [Paras 3, 4, 5]Penalty of Rs. 5,000 under Rule 27 is sustainable as a single maximum penalty; it cannot be multiplied transaction-wise, and the Revenue's appeal to enhance or impose multiple penalties is rejected.Final Conclusion: The Tribunal dismissed the Revenue's appeal and upheld the Commissioner (Appeals)'s decision that a single maximum penalty of Rs. 5,000 under Rule 27 is appropriate for the procedural breach of depositing duty from PLA instead of e-payment, there being no provision for transaction-wise penalties and no loss of revenue. Issues:Violation of Central Excise Rules - Imposition of penalty under Rule 27 for non-deposit of duty through electronic payment.Analysis:The case involved a dispute regarding the imposition of a penalty on the respondents for not depositing the duty via electronic payment as required by the Central Excise Rules. The respondents had instead deposited the duty from their Personal Ledger Account (PLA), leading to the initiation of proceedings resulting in a penalty of Rs. 5,000/- under Rule 27 of the Central Excise Rules, 2002. The Asstt. Commissioner's order imposing the penalty was challenged by the Revenue, leading to an appeal before the Commissioner (Appeals).The Commissioner (Appeals) rejected the Revenue's appeal, noting that Rule 27 provides for a maximum penalty of Rs. 5,000/- and that the Revenue's argument for imposing Rs. 5,000/- for each breach of law was incorrect. The Commissioner emphasized that penal action for a breach of the rule should be more deterrent than punitive, especially in cases where the breach is procedural and not resulting in any revenue loss. The Commissioner justified the penalty of Rs. 5,000/- considering the recurring nature of the procedural lapse due to delayed responses from the bank regarding e-payment facilities.The Revenue, in their appeal memo, failed to provide any reasonable grounds to support an increase in the penalty beyond Rs. 5,000/- per transaction. It was highlighted that there is no provision for imposing penalties on a transaction-wise or manufacture-wise basis under the relevant rules. Consequently, the Revenue's appeals were rejected, affirming the penalty of Rs. 5,000/- per instance as imposed by the Asstt. Commissioner.In conclusion, the appellate tribunal upheld the penalty of Rs. 5,000/- on the respondents for contravening the Central Excise Rules by not depositing the duty through electronic payment, emphasizing the procedural nature of the lapse and the absence of provisions for escalating penalties based on transaction or manufacturing quantities.