Tribunal overturns Rs. 25 Lakhs penalty on appellant, citing unconstitutional rule.

The Tribunal allowed the appeal and set aside the penalty of Rs. 25 Lakhs imposed on the appellant under Rule 25(1) of the Central Excise Rules, 2002. The Tribunal held that since the duty amount along with interest was paid before the show cause notice, and certain provisions of Rule 8(3A) were declared unconstitutional by the High Court, imposing a penalty for duty payment through a CENVAT credit account was unjustified.

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Issues: Penalty imposition under Rule 25(1) of Central Excise Rules, 2002 for default in duty payment using CENVAT credit account.

In this case, the appellant filed an appeal against a penalty of Rs. 25 Lakhs imposed by the adjudicating authority under Rule 25(1) of the Central Excise Rules, 2002. The appellant argued that the duty amount along with interest had been paid through challans, and duty was being paid through a CENVAT credit account at the time of goods clearance. The appellant relied on a case law from the Hon'ble Gujarat High Court to support their argument that certain provisions of Rule 8(3A) were ultra vires. The appellant contended that since the entire default amount had been paid and the High Court had declared certain provisions invalid, no penalty should be imposed. On the other hand, the Revenue defended the penalty imposition, stating that non-payment of duty in cash at the time of clearance would amount to clandestine removal, justifying the penalty under Rule 25(1) of the Central Excise Rules, 2002.

Upon hearing both sides and examining the case records, the Tribunal noted that the defaulted amount along with interest was paid by the appellant before the show cause notice was issued. Referring to the judgment of the Hon'ble High Court in another case, it was observed that the provision of Rule 8(3A) regarding payment of duty without utilizing CENVAT credit had been declared unconstitutional. The Tribunal held that once this provision was invalidated, it was not justified to impose a penalty in a case where duty was paid from a CENVAT credit account. Consequently, the Tribunal allowed the appeal filed by the appellant and set aside the penalty imposed by the adjudicating authority.

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