2024 (1) TMI 390 - AT - Central Excise

Revenue fails to establish fraud or intent required for Section 11AC penalty imposition

CESTAT Chandigarh dismissed Revenue's appeal challenging Commissioner's decision not to impose penalty under Section 11AC of Central Excise Act or Rules ... Levy of penalty - Discharge of duty liability in respect of clearance effected by availing credit in respect of National Calamity Contingent Duty, Additional Duty of Excise on Pan Masala, Education Cess and Higher Education Cess - contention of the Revenue in the instant appeal is that having confirmed the demand, learned Commissioner ought to have imposed penalty under Section 11AC of Central Excise Act or Rule 25/27 of the Central Excise Rules, 2002. Penalty under Section 11AC - HELD THAT:- The terms of the Section are very clear that penalty under the Section can only be imposed when duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded by reasons of fraud, collusion or any wilful mis-statement or suppression of facts or contravention of any of the provisions of this Act or of the Rules made thereunder with intent to evade payment of duty. Thus, to attract penalty under Section 11AC, the five ingredients should be present and intent to evade payment of duty should be established; Tribunal and Courts have been consistent in holding this opinion. The demand is issued under Section 11A of Central Excise Act, 1944, the proviso is not invoked. No elements of fraud, collusion or any wilful mis-statement or suppression of facts or contravention of any of the provisions of this Act or of the Rules made thereunder with intent to evade payment of duty, have been alleged leave alone discussion and establishment of the same - The ingredients for invocation of extended period being not even alleged, the Commissioner was right in his finding. To that extent, there are no infirmity in not imposing penalty under Section 11A of the Central Excise Act, 1944. Non-imposition of penalty under Rule 25 of Central Excise Act, 2002 - HELD THAT:- It is not the case of the Department also that sub-clauses (a) (b) & (c) are applicable; the same are not even alleged in the show-cause notice; there is not even a whisper in the show-cause notice about manufacture, production, storage, removal of goods in contravention of the provisions of the Act or the Rules made thereunder. Therefore, imposition of penalty for contraventions listed in sub-clauses (a) (b) & (c) of Rule 25(1) of Central Excise Rules, 2002 is beyond the scope of the show-cause notice. the conditions for imposing penalty under Rule 25 are also not satisfied and that learned Commissioner was correct in concluding that no case for imposition of penalty has been made by the Revenue. Coming to the penalty under Rule 27 of Central Excise Rules, 2002, we find that though the learned Commissioner mentions that he refrains from imposing penalty under that Section, the same is not invoked in the show-cause notice. When the same is not invoked in the show-cause notice, there is no way that the Adjudicating Authority could have imposed penalty under Rule 27 of Central Excise Rules, 2002 - the conditions for imposing penalty under Rule 25 are also not satisfied and that learned Commissioner was correct in concluding that no case for imposition of penalty has been made by the Revenue. Penalty under Rule 27 of Central Excise Rules, 2002 - HELD THAT:- Though the learned Commissioner mentions that he refrains from imposing penalty under that Section, the same is not invoked in the show-cause notice. When the same is not invoked in the show-cause notice, there is no way that the Adjudicating Authority could have imposed penalty under Rule 27 of Central Excise Rules, 2002. There is no infirmity in the impugned order and the order does not require any intervention - there are no merit in the appeal - appeal dismissed. Issues Involved:1. Utilization of duties and cesses for payment of duty and refund.2. Imposition of penalty under Section 11AC of the Central Excise Act, 1944.3. Imposition of penalty under Rule 25 and Rule 27 of the Central Excise Rules, 2002.Summary:Issue 1: Utilization of Duties and Cesses for Payment and RefundScrutiny of ER-I Returns and refund claims filed by the appellants revealed that they discharged duty liability during August 2007 to January 2008 by availing credit in respect of National Calamity Contingent Duty, Additional Duty of Excise on Pan Masala, Education Cess, and Higher Education Cess. The Department opined that these duties and cesses were not notified for exemption under the relevant Notification, making their utilization for payment and refund incorrect. A show-cause notice dated 28.08.2008 was issued, and the Commissioner confirmed the recovery of the demanded amounts along with interest but refrained from imposing a penalty.Issue 2: Imposition of Penalty under Section 11AC of the Central Excise Act, 1944The Revenue contended that the Commissioner should have imposed a penalty under Section 11AC. The Tribunal noted that for penalty under Section 11AC, the presence of fraud, collusion, wilful mis-statement, suppression of facts, or contravention with intent to evade duty must be established. Citing the Supreme Court's decision in Rajasthan Spinning & Weaving Mills, it was observed that penalty under Section 11AC is a punishment for deliberate deception with intent to evade duty. The Tribunal found no allegations or evidence of such intent in the show-cause notice or the Commissioner's order. Thus, the Commissioner was correct in not imposing a penalty under Section 11AC.Issue 3: Imposition of Penalty under Rule 25 and Rule 27 of the Central Excise Rules, 2002The Tribunal examined the applicability of Rule 25, particularly sub-clause (d), which requires intent to evade payment of duty. It was found that the show-cause notice did not allege contraventions under sub-clauses (a), (b), or (c) of Rule 25(1). As for sub-clause (d), the intent to evade duty was cursorily alleged but not established with evidence. Therefore, the conditions for imposing a penalty under Rule 25 were not satisfied. Regarding Rule 27, the Tribunal noted that it was not invoked in the show-cause notice, making it impossible for the Adjudicating Authority to impose a penalty under this rule. Consequently, the Tribunal found no merit in the Revenue's appeal and dismissed it.Conclusion:The Tribunal upheld the Commissioner's decision not to impose penalties under Section 11AC, Rule 25, and Rule 27 of the Central Excise Rules, 2002, and dismissed the Revenue's appeal.