2023 (10) TMI 1084 - AT - Central Excise

Penalty under Rule 25 set aside for wrongful exemption availment without malafide intention or suppression

CESTAT Ahmedabad held that penalty under Rule 25 of Central Excise Rules, 2002 was not imposable on appellant for wrongful availment of exemption ... Levy of penalty under Rule 25 of Central Excise Rules, 2002 - Wrongful availment of Exemption N/N. 6/2022-CE dated 01.03.2022 which was superseded vide N/N. 6/2006-CE dated 01.03.2007 - relaxed drum - suppression of facts or not - extended period of limitation - HELD THAT:- It was a recurring issue and for the previous period also in the appelant’s own case this Tribunal in AMBICA ENGINEERING WORKS VERSUS C.C.E. & S.T. -SURAT-I [2022 (6) TMI 706 - CESTAT AHMEDABAD], as regard the bonafide of the appellant recorded the submission and given the finding that In the present case the demand for the period 15.04.2004 to February 2008 was raised by the Show cause notice dated 06.04.2009 hence the entire demand is prior to normal period of one year, therefore the same is hit by the limitation. Accordingly we hold that the demand raised in the SCN and confirmed by the Adjudicating Authority is not sustainable being time barred. From the above observation of the Tribunal, it can be seen that on the identical issue in the appellant’s own case for the previous period, this Tribunal has taken a view that there is no malafide intention on the part of the appellant and demand for the extended period was set aside. Since the issue being a recurring, the subsequent show cause notice which is in the present case was issued which is for a normal period, therefore, neither Rule 25 nor Section 11AC can be invoked as there is no suppression of fact. Since on the issue of merit, this Tribunal has already taken a view that considering the nature of the case, there is no malafide intention on the part of the appellant, in the present case also the appellant cannot be liable for penalty under Rule 25. The penalty under Rule 25 of Central Excise Rules 2002 is not imposable in the facts of the present case, hence the penalty imposed under Rule 25 is set aside - The duty demand is maintained. Appeal allowed in part. Issues involved: The issues involved in the judgment are the wrongful availing of Exemption Notification, imposition of penalty under Rule 25 of Central Excise Rules, 2002, and the sustainability of the demand raised in the Show Cause Notice.Wrongful Availing of Exemption Notification: The appellant, engaged in manufacturing textile machinery, availed Cenvat credit under Cenvat Credit Rules, 2004. A Show Cause Notice alleged that the appellant wrongly availed Exemption Notification No. 6/2022-CE by manufacturing and clearing a machine not covered under the Notification. The demand was confirmed in the Order-in-Original, which was upheld by the Commissioner (Appeals). The matter was remanded by the Tribunal for hearing on merit, and the Commissioner (Appeals) rejected the appeal, leading to the present appeal challenging the order.Imposition of Penalty under Rule 25: The appellant did not contest the duty demand but challenged the penalty imposed under Rule 25. The appellant argued that there was no malafide intention to evade duty, as the issue pertained to the interpretation of the Notification. Referring to a previous case, the appellant contended that there was no suppression of fact, and hence, the penalty under Rule 25 was not sustainable. The Tribunal considered the submissions and held that the penalty under Rule 25 was not imposable due to the absence of malafide intention and suppression of fact.Sustainability of Demand in Show Cause Notice: The Tribunal examined whether the demand raised in the Show Cause Notice was sustainable. Referring to a previous order, the Tribunal noted that there was no suppression of fact with intent to evade payment of duty by the appellant. As the demand was for a period prior to the normal period of one year, it was deemed time-barred. The Tribunal distinguished the facts of other cases cited and concluded that the penalty under Rule 25 was not applicable in the present case, setting it aside while maintaining the duty demand.This judgment highlights the importance of compliance with exemption notifications, the criteria for imposing penalties under Rule 25, and the considerations for determining the sustainability of demands raised in Show Cause Notices.