Penalties imposed u/Rule 25 of CER, 2002 & u/Rule 13 of CCR, 2004

PJ/Case Laws/2011-12/1478

Case: COMMISSIONER OF CENTRAL EXCISE, KANPUR versus MINAKSHI CASTINGS

Citation: 2011 (274) E.L.T. 180 (All.)

Issue:- Penalties imposed under Rule 25 of Central Excise Rule, 2002 & Rule 13 of the Cenvat Credit Rule, 2002 – set aside – whether justifiable?

Brief Fact:- An affidavit of Sri Vipul Gupta, Assistant Commissioner, Central Excise Division, Jhansi has been filed stating that the order was served upon the Appellant on 21-4-2006 and Central Excise Appeal has been filed under Section 35G of the Central Excise Act, 1944 on 18-10-06 i.e. within 180 days can be imposed. The Tribunal found that there was no evidence of any kind to support the findings of clandestine removal, not tallying with the physical stock. The Tribunal relied upon the case of C.C.E. Delhi III v. Machino Mon-tell (I) Ltd. - 2004 (168) E.L.T. 466 (Tri.-LB) in support of its view that in such event no penalty is imposable. The appeal is thus within limitation. The defect is removed. . No one has appeared on behalf of respondent’s inspite of registered notice sent by the court, which has not returned either undelivered or unserved. The service is deemed to be sufficient.

Appellant’s Contention:- The Appellant has relied upon Union of India v. Rajasthan Spinning & Weaving Mills - 2009 (238) E.L.T. 3 (S.C.), and submits that the view taken in Union of India v. Dharmendra Textile Processors - 2008 (231) E.L.T. 3 (S.C.) has not been approved by the Supreme Court. The payment of the differential duty, whether before or after the show cause notice is issued, can alter the liability for penalty, the conditions for which are clearly spelled out in Section 11AC of the Central Excise Act. Section 11AC of the Act authorizing levy of penalty, pre-supposes an intention to evade the duty, where any duty has not been levied, or paid or has been short-levied or short-paid or erroneously refunded by reason of fraud, collusion or any willful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or rules made thereunder with intent to evade payment of duty, the person is liable to pay the duty as determined under sub-section (2) of Section 11A and shall also be required to pay penalty equal to the duty so determined.

The Supreme Court in Union of India v. Rajasthan Spinning & Weaving Mills - 2009 (238) E.L.T. 3 (S.C.) (Para 19), held that it is clear that penalty under Section 11AC, as the word suggests, is punishment, for an act of deliberate deception by the assessee with the intent to evade duty by adopting any of the means mentioned in the section.

Reasoning of Judgment:- The Supreme Court in Union of India v. Rajasthan Spinning & Weaving Mills - 2009 (238) E.L.T. 3 (S.C.) (Para 19), held that it is clear that penalty under Section 11AC, as the word suggests, is punishment, for an act of deliberate deception by the assessee with the intent to evade duty by adopting any of the means mentioned in the section. The Tribunal has found that there is no material or evidence of any kind to support the findings, that there was clandestine removal, which did not tally with the physical stock. In substance it was found that there was shortage of finished goods. The shortage of finished goods, by itself could not unless it is related to clandestine removal of finished goods for which there was no material evidence, infer evasion of excise duty, and thus no penalty can be imposed.

Decision:- Appeal dismissed.

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PJ/Case Laws/2011-12/1478

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