Chartered Accountant
Bookmark and Share
click here to subscribe our newsletter
 
 
Corporate News *  The GSTN has issued an Advisory dated 21.04.2026 about the introduction of an Offline Tool for the Invoice Management System (IMS)  *  CBIC extends due dates for filing of FORM GSTR 3B  for the month of April 2026 *  Interest cannot be imposed in adjudication order, if not demanded/quantified in show cause notice : Allahabad HC *  Wheelchairs with toileting facility eligible for exemption: CESTAT affirms customs duty exemption to importer *  Industries urge GST council to allow inverted duty refunds on input services *  Tamil Nadu GST dept introduced virtual hearing facility for GST appeals under under section 107 of the TNGST act: detailed guidelines  *  CIC urges authorities to implement GST evasion complaint tracking system *  Even if the assessee opts "NO" for personal hearing in form DRC-06 ,The mandatory requirement under section 75(4) to grant opportunity of hearing cannot be waived:Gujarat High Court  *  Glufosinate imports curbs imposed by govt *  Government extends Re-import period for exported cut & polished diamonds *  CIC flags lack of tracking system for tax evasion complaints,urges GST authorities to improve transparency *  No Custodial Interrogation needed in GST fraud case based on documentary evidence already in Department's Possession : Chattisgarh HC *  Orders under section cannot be sustained if passed without considering the taxpayer's objections and without granting a personal hearing:Gujarat High Court *  Mere cancellation of supplier's registration cannot,by itself,justify denial of ITC or cancellation of the recipient's registration:Bombay High Court *  High Court sets aside GST notice citing factual errors and natural justice violations *  Provisional Bank Attachment under Section. 110 of Customs Act Unsustainable Beyond Statutory period without Extension order: Bombay HC orders to defreeze accounts *  Post Clearance MRP Alteration by Distributor Does not attract Differential Customs Duty: CESTAT *  DGFT Expands scope of 'Screws' classification under RoDTEP Scheme  *  E-way bills surze to all time high of 140.6 million in March *  GST Exemption Allowed on Pure Labour Services for Standalone Houses: AAR  *  GST Payable Only on Margin in Second-Hand Car Sales, Subject to Strict Conditions and No ITC Claim: AAR *  DGFT rolls out procedure for allocation of calcined coke *  GST portal update : Pre-deposit amount now editable in Appeals *  J&K HC declared TMT scrap a 'Specified Good' eligibile for GST refunds under Support Scheme  *  Pigmy agents are employees of banks; no GST can be levied on commission  paid to them : Karnataka HC *  DGFT Revises HS Code Description for Screws Under RoDTEP *  GST Registration Cancellation Invalid Without Proper Service of Notice: Allahabad High Court. *  Bengaluru CGST | GST Backlog Appeals Deadline Fixed at June 30, 2026 *  No Time Bar on Refund of Service Tax for Services Not Rendered: CESTAT  Remands Indiabulls Case for Unjust Enrichment Check. *  Supreme Court Holds Renewable Energy Incentive Must Benefit Generators, Not Be Adjusted in Tariff
Subject News *   Delhi HC Quashes Order, Says Reminder Cannot Validate Improperly Served GST SCN *  KARNATAKA HIGH COURT REMANDS GST SHORTFALL MATTER DUE TO ABSENCE OF PERSONAL HEARING   *  CESTAT cancels confiscation and penalties on imported computer cabinet cases: Custom duty restricted to 111 surplus units *  Deposit of tax during search or investigation cannot be treated as 'Voluntary Payment' : Bombay High Court *  Section 76 of the CGST cannot be invoked where the tax has already been duly deposited, even if through another registration of the same entity: Madras High Court *  Sec 74 allows use of material regardless of source; illegality or flaws in section 67 search do not vitiate valid adjudication: HC *  Inter-State transfer of ITC on Amalgamation permissible as given under section 18(3) read with rule 41 of the CGST rules, 2017: Gujarat High Court *  HC: No GST on commisson paid to Pigmy Agents *  IGST refund denial on illegible bill of lading invalid absent chance to furnish docs; merit reconsideration in appeals directed: HC *  ITC is not admissible on GST paid on leasehold rights of land used fpr setting up an air seperation plant: AAAR,Tamil Nadu *  GST: No penalty under Section 74 after voluntary ITC reversal due to non-existent supplier : High Court *  TN AAAR denies GST ITC on Land Lease under Sec. 17(5)(d) for setting up plant and machinery *  GST proceedings quashed as notices sent to old address, despite updated address in registration *  Importer Can’t Be Penalised for Alleged IGCR Procedural Lapses Without Evidence of Departmental Error: CESTAT *  Structured Healthcare Training Not ‘Charitable Activity’, 18% GST Payable: AAR  *  CESTAT As The Appellate Authority For Central Sales Tax Disputes: A Paradigm Shift Under Finance Act, 2023 *   Rs. 25K Cost Imposed On SGST Joint Commissioner for Attaching Bank  Accounts Without Forming Mandatory “Opinion”: Bombay HC *   Ex-Parte GST Order Without Hearing Violates Natural Justice: Karnataka  High Court Quashes Adjudication and Bank Attachment.  *   Retrospective GST Cancellation Can’t Invalidate Genuine Transactions:  Jaipur Commissioner (Appeals) Quashes Rs. 95,670 ITC Demand. *   GST Pre-Deposit Non-Compliance: Allahabad High Court Allows Appeal  Subject to Rs. 30 Lakh Balance Deposit, Recognises Offline Filing. *  Documentary Nature of Evidence: Allahabad High Court Grants Bail in Rs. 32.66 Crore Fake ITC Fraud Case *  Supreme Court Flags Systemic Bias in Army’s Permanent Commission Process for Women Officers *  Re-Determination of Land Compensation Can Be Based on Appellate Court Awards, Clarifies Scope of S. 28-A: Supreme Court. *  Supreme Court Imposes Rs. 5 Lakh Costs On Rent Authority Officer For Acting Beyond Jurisdiction. *  DGGI Meerut | Court Denies Bail to Accused in Claiming Fake ITC And Export Refunds *  Denial of GST Rate Revision Benefit to Contractor Violates Article 14: Rajasthan HC *  GST Registration Cancellation for Non-Filing of Returns: Gauhati High Court Directs Restoration on Compliance. *   Supreme Court Quashes FEMA Adjudication Orders, Revives Proceedings at  Show Cause Stage. *   Higher Rank, Harsher Punishment Justified: Supreme Court Restores Dismissal  of Bank Manager in Misappropriation Case. *   Limitation for Export Refund to Be Counted from Foreign Exchange Realisation,  Not From Export Invoices Issuance: CESTAT  

Comments

Print   |    |  Comment

PJ/Case Laws/2010-11/1014

No intention to evade payment of duty, should a person be penalized?
Case: CCE & C v/s Saurashtra Cement Ltd 
 
Citation: 2010 (103) RLTONLINE 169 (GUJ.)
 
Issue:- When the assessee has no intention to evade payment of duty, should he be penalized?
 
Brief Facts:- Respondent- assessee has cleared excisable goods without payment of duty in time. The delay in payment of duty was about 25 to 56 days. Department issued show cause notices demanding duty under Section 11AC of the Central Excise Act, 1944 along with interest under Section 8(3) of the Act and penalty under Rule 25 of the Rules was proposed to be imposed. The Adjudicating Authority confirmed the duty demand was confirmed with interest under Rule 8(3) and also imposed penalty of equal amount of duty demanded under Rule 25 of the Rules.
 
In appeal, the Commissioner (Appeals) confirmed the demand of duty as well as the interest but reduced the penalty to Rs. 5 lakhs in one of the appeals. In all other matters, the Commissioner (Appeals) confirmed the orders passed by the Adjudicating Authority.
 
In further appeal, the Tribunal considering Rule 25 observed that Rule 25 provides for imposition of penalties which shall not exceed the duty on the excisable goods, when there is contravention of the nature referred to in clause (a), clause (b), clause(c) or clause(d). The Tribunal found that clause (a) of Rule 25 refers to removal of excisable goods in contravention of any of the provisions of the Rules. When goods were removed, no excise duty was required to be paid at that point of time. As such, it cannot be said that the contravention of the nature mentioned in the said clause has been committed by the assessee. Clause (b) is to the effect that the manufacturer does not account for any excisable goods manufactured by him. The said clause does not stand contravened in as much as the goods were duly reflected in the statutory records. Similarly, clause(c) does not stand contravened in as much as the assessee has not manufactured goods without applying for registration. Clause (d) refers to contravention of any of the provisions of the Rules with intent to evade payment of duty. Excisable goods were entered in records, cleared on Central Excise invoices and duty was also paid subsequently, though belatedly along with interest. As such, the said clause (d) is also not contravened. After analyzing and examining all these four sub-clauses of Rule 25, the Tribunal held that the invocation of Rule 25 for imposition of penalty for delayed deposit of duty is not in accordance with law.
 
The Tribunal relied upon the judgments given in M/s Condor Power Products P. Ltd., [2007 (79) RLT 124 (CESTAT-Del.), M/s Automotive India (Raipur) Pvt. Ltd., [2006 (77) RLT 140 (CESTAT Del.)] and CCE, Allahabad v/s R.K. Cigarettes (P) Ltd., [2007 (79) RLT 804 (CESTAT – Delhi)]. The Tribunal reduced the penalty to Rs. 5,000/- in all cases.
 
Against this order, Revenue is in appeal before the High Court.
 
Appellant’s Contention:- Revenuesubmitted that the Tribunal seriously erred in appreciating the provisions of Rule 8(1) of the Central Excise Rules, 2002, while passing the impugned order and therefore, the impugned orders are bad and illegal and are required to be quashed and set aside.
 
Revenue has further submitted that the respondent herein had defaulted in payment for more than a month and therefore, the respondents have violated the provisions of Rule 8(1) and 8(3) of the Rules. It was further submitted that the duty liability stands discharged only when an assessee pays the amount by the specified date. Further, a grace period of a month is provided in the Rules to pay the duty along with the interest after the specified date. The respondents have not followed either of the provisions of Rule 8 and have cleared the said goods without payment of duty, and thereby contravened the said Rule and attracted the exemplary penalty.
 
Revenue has further submitted that when the goods are deemed to be cleared without payment of central excise duty, the penalty provision under the Central Excise law is applicable.
 
It is submitted that the decisions relied upon by the Tribunal were not applicable to the facts of the present case.
 
Revenue has further submitted that, in the present case, the respondents appears to be habitual offenders and are well aware that they would not be able to fulfill the obligations for payment of duty by the due date and hence, the respondents have contravened the provisions of Rule 25.
 
Respondent’s Contention:- Respondent contended that the Tribunal had in its order had discussed each clause of Rule 25 and had concluded that there was no contravention of any of these clauses and held that invocation of Rule 25 for imposition of penalty for delayed deposit of duty is not in accordance with law. Respondent referred to the provisions of Section 11AC and submitted that “Where any 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 willful mis-statement or suppression of facts” in these cases only, penalty shall be leviable equal to the duty so determined. Respondent submitted that in their case, there is no allegation that there was an intention to delay the payment. It is only because of the stringent financial circumstances, the payment was delayed, otherwise the duty was paid along with interest @ 24%.
 
They relied upon the judgments given in Commissioner of Central Excise, Guntur v/s Andhra Cements Limited [2007 (216) ELT 362 (A.P.)], Supreme Industries Ltd. v/s C.E.S.T.A.T., New Delhi [2007 (214) ELT 187 (M.P.)], Superintendent of Central Excise v/s Sance Pharmaceuticals [2009 (247) ELT 136 (Ker.)] andUnion of India v/s Rajasthan Spinning & Weaving Mills [2009 (238) ELT 3 (SC)].
 
Reasoning of Judgment: - The High Court observed that the provisions of Rule 25 are subject to the provisions of Section 11AC of the Central Excise Act, 1944. And for the purpose of invoking Section 11AC, the condition precedent is that the duty has not been levied, or paid or short-levied or short-paid or the refund is erroneously granted by reasons of fraud, collusion or any willful misstatement or suppression of facts. If these ingredients are not present, penalty under Section 11AC cannot be levied. Since Rule 25 can be invoked subject to the provisions of Section 11AC of the Act, as a natural corollary, the ingredients mentioned in Section 11AC are also required to be considered while determining the question of levying of penalty under Rule 25 of the Central Excise Rules.
 
The High Court relied upon the judgment given in the case of Commissioner of C. Ex. Guntur v/s Andhra Cements Limited (Supra) wherein it was held that there should be an element of intention to evade payment of duty for imposing penalty under Rule 25. Evasion of payment of duty is not sufficient to impose penalty on a producer or manufacturer.  
 
Reliance was also placed on Superintendent of Central Excise v/s Sance Pharmaceuticals (Supra) wherein it was held that imposition of penalty should be preceded by a finding that there was a willful default as such.
 
Reliance was also placed on Supreme Industries Limited v/s C.E.S.T.A.T., New Delhi  wherein it was held that enforcement of penal clause to be done subject to strict proof of intention to evade payment of duty. Similarly, reliance was placed on the judgments given in Union of India v/s Rajasthan Spinning & Weaving Mills [2009 (238)E.L.T. 3 (S.C.)], Commissioner of Ce. Ex., Bhavnagar v/s Saurashtra Chemicals Limited [2007 (212) E.L.T. 7 (S.C.)] and inK.R.C.S. Balakrishna Chetty and Sons & Co. v/s The State of Madras [A.I.R. 1961 SC 1152].
 
Accordingly, on facts of the present case the High Court held that there was no intention on the part of the respondent assessee to evade any payment of duty. It is only because of stringent financial condition, that the duty could not be paid in time and as soon as liquidity was available, duty was paid along with interest. The Tribunal rightly concluded that penalty could not be levied under Rule 25 of the Rules and for the alleged default, the penalty was restricted to Rs.5000/- in each matter under Rule 27 of the Rules. 
 
No substantial question of law involved in the appeal.
 
Judgment:- Appeal dismissed.
 
Department News


Query

 
PRADEEP JAIN, F.C.A.

Head Office : -

Address :
"SUGYAN", H - 29, SHASTRI NAGAR, JODHPUR (RAJ.) - 342003

Phone No. :
0291 - 2439496, 0291 - 3258496

Mobile No. :
09314722236

Fax No. :0291 - 2439496


Branch Office : -

Address:
1008, 10th FLOOR, SUKH SAGAR COMPLEX,
NEAR FORTUNE LANDMARK HOTEL, USMANPURA,
ASHRAM ROAD, AHMEDABAD-380013

Phone No. :
079-32999496, 27560043

Mobile No. :
093777659496, 09377649496

E-mail :pradeep@capradeepjain.com