2017 (12) TMI 319 - AT - Central Excise

Tribunal overturns penalty due to lack of collusion, suppression, or fraud in Show Cause Notice

The Tribunal set aside the Order-in-Appeal and ruled that the penalty under Rule 173Q could not be imposed due to the absence of allegations of collusion, ... Penalty u/r 173Q of CER, 1944 - scope of SCN - case of appellant is that in the present SCN there was no allegation related to either collusion or suppression or willful statement, etc. and therefore, penalty imposed is not in accordance with provisions of Rule 173Q of CER, 1944 - Held that: - there are no ingredients in the said SCN, which indicated that the matter was related to either collusion or suppression or willful statement, etc. and therefore, Section 11AC of the CEA, 1944 was not invocable and therefore, the penalty u/r 173Q of CER, 1944 of said rules was not imposable in the present case - appeal allowed - decided in favor of appellant. Issues:- Imposition of penalty under Rule 173Q of Central Excise Rules, 1944 without allegations of collusion, suppression, or fraud in the Show Cause Notice.Analysis:The case involved an appeal against the Order-in-Appeal passed by the Commissioner of Central Excise & Customs, Meerut-II at Noida. The appellant, engaged in the manufacture of Cigarettes, was a subsidiary of M/s Godfrey Phillips India Ltd. (GPIL). The issue revolved around the disallowance of Cenvat credit due to invoices issued by GPIL before their registration as a First Stage Dealer. The Show Cause Notice dated 21/05/2001 proposed to recover Cenvat credit and impose penalties under Rule 57AH and Rule 173Q of the Central Excise Rules, 1944. The matter had previously reached the Tribunal, leading to the imposition of a penalty of &8377; 14,39,491 on the appellant. The Commissioner (Appeals) upheld this penalty, prompting the appellant to appeal before the Tribunal.The appellant argued that the penalty under Rule 173Q should be subject to the provisions of Section 11AC of the Central Excise Act, 1944, which require allegations of collusion, suppression, or fraud. However, the Show Cause Notice did not contain any such allegations. The Revenue supported the impugned Order-in-Appeal.After considering the contentions and examining the provisions of Rule 173Q and the Show Cause Notice, the Tribunal found no indication of collusion, suppression, or willful statement in the Notice. As a result, Section 11AC of the Central Excise Act, 1944 was not applicable, and the penalty under Rule 173Q could not be imposed in the absence of such allegations. Consequently, the Tribunal set aside the Order-in-Appeal and ruled that the Order-in-Original would not survive in law. The appeal was allowed, and the appellant was entitled to consequential relief as per the law.In conclusion, the Tribunal's decision focused on the lack of essential allegations in the Show Cause Notice to invoke the penalty under Rule 173Q of the Central Excise Rules, 1944. The judgment emphasized the importance of meeting the statutory requirements for imposing penalties, particularly in cases involving collusion, suppression, or fraud as outlined in Section 11AC of the Central Excise Act, 1944.