Tribunal Upholds Penalty Decision on EOU for Goods Diversion

The Tribunal upheld the decision of the Ld. Commissioner to impose a penalty of &8377; 60 Lakhs under Rule 25 of the Central Excise Rules, 2002, instead of section 11AC, on a 100% EOU for diverting goods to DTA with permission after an order cancellation. The Tribunal found no malafide intention in the diversion and emphasized the significance of intention and permission in such cases, ultimately dismissing the Revenue's appeal for a penalty under section 11AC.

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Issues:
1. Demand raised on clearances of goods to DTA after diversion from EOU.
2. Imposition of penalty under Rule 25 of Central Excise Rules, 2002 instead of section 11AC.
3. Appeal by Revenue seeking imposition of penalty under section 11AC.

Analysis:
1. The case involved the appellant, a 100% EOU, who diverted goods to DTA after an order cancellation, with permission from the Deputy Commissioner. A demand of &8377; 2,44,36,542/- was confirmed on clearances to DTA, with a penalty of &8377; 60 Lakhs under Rule 25 imposed by the adjudicating authority. The Revenue appealed seeking a penalty equal to the duty under section 11AC.

2. The Revenue's appeal was presented by Ms. Nitina Nagori, Ld. Joint Commissioner (AR), while no representation was made by the respondent. Despite the notice sent, the respondent was not available at the given address, leading to the appeal being taken up for disposal.

3. Upon careful consideration of submissions and records, it was found that the diversion of goods from EOU to DTA was not a case of clandestine removal. The diversion occurred due to the cancellation of the order, with necessary permission obtained from the Deputy Commissioner. The absence of malafide intention on the appellant's part was noted. The Ld. Commissioner imposed a penalty of &8377; 60 Lakhs under Rule 25, providing detailed reasons for not applying the penalty under section 11AC. The Tribunal upheld the Ld. Commissioner's findings, dismissing the Revenue's appeal.

This judgment emphasizes the importance of intention and permission in cases of diversion of goods, distinguishing between penalties under different rules and sections based on the circumstances of the case.

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