2015 (6) TMI 372 - HC - Central Excise

Intent required for penalties under CENVAT Credit Rules; case law clarifies

Commissioner of Central Excise, Chandigarh-I Versus M/s Saluja Exim Ltd & Another

The High Court of Himachal Pradesh held that penalties under Rule 13(1) of the CENVAT Credit Rules, 2002 cannot be imposed without mens rea. Citing legal ... Imposition of penalty - Mens Rea - Whether the penalty under Rule13(1) of CENVAT Credit Rules, 2002 was to be imposed even if there was no mens rea on the part of the assessee - Held that:- Decision in the case of Commissioner of Central Excise, Chandigarh Versus Pepsi Foods Limited [2010 (12) TMI 15 - Supreme Court of India] - In view of the settled position of law, no other and further order is required to be passed in this appeal - Appeal disposed of. Issues:Whether penalty under Rule 13(1) of CENVAT Credit Rules, 2002 should be imposed in the absence of mens rea.Analysis:The judgment by the High Court of Himachal Pradesh addressed the issue of imposing penalties under Rule 13(1) of the CENVAT Credit Rules, 2002 without the presence of mens rea. The court referred to a previous decision by the Hon'ble Supreme Court of India in Commissioner of Central Excise, Chandigarh v. Pepsi Foods Limited, where it was established that mens rea is a crucial element for an offense involving deliberate evasion of duty. The Supreme Court emphasized that for penalties to be imposed, there must be evidence of deliberate deception by the assessee with the intent to evade duty. The court highlighted the necessity of mens rea in cases involving fraud or misrepresentation, stating that penalties under Section 11-AC cannot be levied without proof of mens rea unless explicitly intended by the statute.The judgment further cited legal principles from the House of Lords and previous court decisions to support the requirement of mens rea for imposing penalties. It referenced the use of the term 'knowingly' in statutes as a condition for liability and reiterated that penalties are meant to punish deliberate deception by the assessee with the intent to evade duty. The court's analysis underscored the significance of mens rea in determining liability for penalties under Section 11-AC, emphasizing that penalties are warranted only in cases where there is clear evidence of intentional misconduct to evade duty.Ultimately, the court concluded that in light of the settled legal position emphasizing the importance of mens rea in penalty cases, no further orders were necessary in the appeal. The appeal was disposed of accordingly, with any pending applications also being resolved. The judgment provided a comprehensive analysis of the legal principles surrounding the imposition of penalties under Rule 13(1) of the CENVAT Credit Rules, 2002, emphasizing the requirement of mens rea in cases involving deliberate deception to evade duty.