Penalty under Rule 25 fails where a small scale unit had no statutory duty to maintain production and clearance records.

Penalty under Rule 25 of the Central Excise Rules, 2002 was held unsustainable where the unit was a small scale assessee below the exemption threshold and had no statutory obligation to register or maintain accounts of production and clearance. In the absence of a legal duty to keep such records, non-maintenance could not be treated as a violation attracting penalty, and the rule could not be applied merely because records might have helped determine when the exemption limit was crossed.

---

---

Issues: Whether penalty under Rule 25 of the Central Excise Rules, 2002 could be imposed on a small scale unit which was not under any statutory obligation to maintain accounts of production and clearance.

Analysis: The appellant was found to be a small scale unit whose production and clearances were below the exempted limit, and therefore it was not required to be registered or to maintain statutory records of production and clearance. In the absence of such a statutory obligation, failure to keep accounts could not amount to a violation attracting Rule 25. The rule could not be invoked merely on the reasoning that the unit ought to have maintained some record to determine when the exemption limit was crossed.

Conclusion: Penalty under Rule 25 was not sustainable and was set aside in favour of the assessee.

---