2017 (6) TMI 1135 - AT - Central Excise

Penalty Overturned for Lack of Opportunity to Defend

The Tribunal set aside the imposed penalty of &8377; 75 lakhs under Rule 26 of Central Excise Rules, 2002, as it exceeded the scope of the show cause ... Penalty u/r 27 of CER, 2002 - appellants were alleged to have supplied unaccounted packing material to the manufacturers M/s Shyam Traders - whether invocation of rule 27 is justified or rule 26 should have been invoked? - Held that: - the imposition of penalty of ₹ 75 lakhs on the appellant through the said Order-in-Original dated 23.03.2007 was beyond the proposal of imposition of penalty under Rule 27 on the appellant through said show cause notice dated 20.10.2004. Therefore, imposition of penalty of ₹ 75 lakhs on the appellant through the above sated Order-in-Original is not sustainable - appeal allowed - decided in favor of appellant. Issues: Imposition of penalty under Rule 26 of Central Excise Rules, 2002 without proper notice and beyond the scope of show cause notice.In this case, the appellant was issued a show cause notice proposing a penalty under Rule 27 of Central Excise Rules, 2002 for supplying unaccounted packing material to a manufacturer. The original authority, in the Order-in-Original dated 23.03.2007, confirmed the demand of Central Excise duty against the manufacturer and imposed a penalty of &8377; 75 lakhs on the appellant under Rule 26 of Central Excise Rules, 2002. The appellant appealed, arguing that they were not given an opportunity to present their defense against the imposition of the penalty under Rule 26 and that the original authority exceeded the scope of the show cause notice by invoking Rule 26. The Tribunal found that the imposition of the penalty under Rule 26 was beyond the proposal in the show cause notice under Rule 27. Therefore, the Tribunal set aside the imposed penalty of &8377; 75 lakhs and allowed the appeal, granting the appellant consequential relief as per the law.This judgment highlights the importance of adhering to the scope of the show cause notice and providing the appellant with a fair opportunity to present their defense. It underscores the principle that penalties must be imposed within the confines of the allegations made in the show cause notice to ensure procedural fairness and compliance with the Central Excise Rules, 2002.