Minimum penalty under Cenvat and Central Excise rules cannot fall below Rs. 10,000; lower penalty was unsustainable.

Rule 13 of the Cenvat Credit Rules, 2002 read with Rule 25 of the Central Excise Rules, 2002 was construed to prescribe a minimum penalty floor of Rs. 10,000, because the penalty cannot exceed the duty involved or Rs. 10,000, whichever is greater. A penalty of Rs. 1,000 was therefore below the statutory minimum and unsustainable. The penalty was correctly enhanced to Rs. 10,000 in favour of the Revenue.

---

---

Issues: Whether penalty under Rule 13 of the Cenvat Credit Rules, 2002 read with Rule 25 of the Central Excise Rules, 2002 could be imposed at less than Rs. 10,000.

Analysis: The penalty provisions in Rule 13 of the Cenvat Credit Rules, 2002 and Rule 25 of the Central Excise Rules, 2002 provide that the penalty shall not exceed the duty on the excisable goods in respect of which the contravention was committed, or Rs. 10,000, whichever is greater. On that construction, the minimum penalty prescribed by the rules is Rs. 10,000 and a penalty of Rs. 1,000 was below the statutory floor.

Conclusion: The penalty of Rs. 1,000 was unsustainable and was correctly enhanced to Rs. 10,000 in favour of the Revenue.

---