Penalty under Rule 25 & 26 - sustainability of

PJ/Case Laws/2011-12/1159

Case: VVF Limited Vs. Commissioner of Central Excise, Belapur

Citation: 2011(267) E.L.T. 134 (Tri. Mumbai)

Issue:- Penalty imposed under Rule 25 & 26 cannot be imposed if there is no mens rea to evade payment of duty.

Brief Facts:- Appellant’s firm is 100% EOU and sought clearance of their finished goods in DTA w.e.f. April 2005. Thereafter, Appellant started clearing their goods in DTA following the procedure of Rule 8 of the Central Excise Rules, 2002 by paying duty by 5^th of following month under which the duty is payable. The appellants also filed returns regularly with the Department. The appellants cleared goods under the duty paid invoices but the only allegation against them was that they have not paid the duty at the time of clearance of their goods under Rule 17 of the Central Excise Rules, 2002. The department detained their goods on 29.03.2006 which were cleared by them against the central excise duty paid invoice but duty of the same was not paid to the Government. The goods were confiscated and released under the provisional bond.

Show cause notice was issued to the appellants for confiscation of the said goods and imposition of penalty on the appellants. The Adjudicating Authority confirmed the confiscation and allowed the said goods to be redeemed on payment of fine and penalties (equivalent to duty) under Rule 25 of the Central Excise Rules, 2002 was imposed on the appellant and penalty under Rule 26 of Central Excise Rules, 2002 was imposed on the Dy. General Manager of the appellant. Aggrieved by the said imposition of penalties, the appellants are before the Tribunal.

Appellants Contention:- The appellant submitted that the appellant is an EOU and therefore, they have got permission to clear their goods in DTA is April 2005 and have cleared their goods under Rule 8 by paying duty by 5^th day of the following month in which their goods were cleared. In fact they were not aware of the Rule 17 wherein the goods are to be cleared after paying duty. The appellant also submit that there was no intention to clear the goods clandestinely and there was no such charge in the show cause notice. The appellants submitted that as they were paying duty regularly on the monthly basis and have shown in the returns also, the Revenue has not pointed out the mistake to them. Moreover, all the invoices against which the goods were cleared, the duty of Central Excise was shown as payable. In the absence of any mens rea, no penalty is leviable on them. The appellant further submitted that in this case, no specific provision of Rule 25 has been prescribed in the show cause notice for imposing penalty on the firm, hence no penalty can be levied on them. To support their contention, appellant placed reliance on judgments in Amrit Foods Vs. Commissioner of Central Excise, U.P. [2005 (190) E.L.T. 433 (SC)] and J.K. Corporation Ltd. Vs. CCE, Bhubaneswar [2007 (210) E.L.T. 501 (Ori.)]. The appellant further submitted that as per Section 11A, sub–section 2 (B) of the Central Excise Act, 1944 they have paid the duty before the issuance of Show Cause Notice, hence no penalty is imposable on them.

Respondents Contention:- Revenue submitted that charges have been framed clearly against the appellants and no mentioning of the said clause under which the penalty is to be imposed is not relevant when the same is clear from the charges alleged against in the show cause notice. Moreover, the judgement relied on by the appellant are not on the identical facts as in this case. The respondent also submit that the Original Authority has clearly held that the appellant is liable for penalty under Rule 25 (1) (a) of the Central Excise Rules 2002 which is not in the case of judgement relied upon by the appellant. Revenue further submitted that the conduct of the appellants says that they are having mala fide intention of not paying duty in time, hence the provision of Rules 25 and 26 ibid are attractable to this case.

Reasoning of Judgment:- The Tribunal held that the fact that the appellant are 100% EOU and sought permission to clear their goods in DTA with effect from April 2005 are not in dispute. It is also not in dispute that the appellants are paying duty on monthly basis as per Rule 8 and filing their Returns regularly. It is also not in dispute that the appellants are not issuing duty paid invoices and the same has been sown in the monthly returns as ‘Duty payable’. The only allegation against the appellants is that they are not paying duty at the time of clearance as per Rule 17 of the Central Excise Rules, 2002. It was held that when it is not alleged that there is any intention of the appellants to evade payment of duty, in that event, the allegation of mens rea cannot be alleged against the appellants. In that event and in the absence of any mens rea, penalty under Rule 25 is not impossible on the appellants as held by the High Court of Punjab and Haryana in the case of Commissioner of Central Excise, Chandigarh Vs. Sadashiv Ispat Ltd. [2010 (256) E.L.T. 349 (P&H)]. The Tribunal also held that the goods are liable for confiscation. Hence, penalty under Rule 26 of the Central Excise Rules, 2002 is also not leviable on the appellant. Impugned order set aside.

Decision:- Appeal allowed with consequential relief.

************

Comments

PJ/Case Laws/2011-12/1159

Post a Comment

Query