The penalty cannot be imposed for technical lapse of non production of re-warehousing certificate.

PJ/Case Laws/2012-13/1235

Case:- Commissioner of Central Excise & Cus., Vapi versus Sterlite Industries P. Ltd.

Citation:- 2011 (274) E. L.T. 178 (Guj.)

Brief Facts:-In the present case, M/s. Sterlite Industries Pvt. Ltd. is engaged in the manufacture of continuous cast copper rods. Investigation was carried out on an input by the Directorate General of Central Excise Intelligence, Vapi Regional Unit and on examination of the record of respondent clearance of huge quantity of rods without payment of duty under the Central Excise Act was noticed. Show cause notice was issued to the respondent demanding duty as well as penalty under Section 11AC of the Central Excise Act read with Rule 25 of the Central Excise Rules, 2002. After due adjudication Order-in-Original, recorded findings against the respondent and in favour of Department making the respondent liable for penalty under Section 11AC of the Act. Being aggrieved by this order in original, the same was challenged before Commissioner (Appeals), which allowed the Appeal of the respondent by setting aside the order-in-original vide its order.

The Department carried this appeal before the CESTAT and CESTAT remanded the matter back to the Commissioner (Appeals) for fresh adjudication vide its order, in the light of order of Supreme Court in the case of C.C. v. M/s. Aafloat Textile (I) Pvt. Ltd. - 2009 (91) RLT 719 (S.C.) = 2009 (235) E.L.T. 587 (S.C.), where the Hon'ble Supreme Court has laid down that the extended period of limitation is available when the import licenses were found to be forged and obtained in fraud. The Commissioner (Appeals) after deliberating over the issue confirmed the demand of duty and interest and appropriation of an amount paid towards the same and set aside penalty imposed on respondent. When the said order was challenged before CESTAT, the order of deletion of penalty was confirmed by the Tribunal vide its order and impugned order is under challenge before this Court.

Appellant Contention:- The Appellant said that The Commissioner (Appeals) for fresh adjudication vide its order, in the light of order of Supreme Court in the case of C.C. v. M/s. Aafloat Textile (I) Pvt. Ltd. - 2009 (91) RLT 719 (S.C.) = 2009 (235) E.L.T. 587 (S.C.), where the Hon'ble Supreme Court has laid down that the extended period of limitation is available when the import licenses were found to be forged and obtained in fraud. The Commissioner (Appeals) after deliberating over the issue confirmed the demand of duty and interest and appropriation of an amount paid towards the same and set aside penalty imposed on respondent. When the said order was challenged before CESTAT, the order of deletion of penalty was confirmed by the Tribunal vide its order dated 9-6-2010 and impugned order is under challenge before this Court. What emerges from the record is that without payment of duty against CT2 Certificate and advance license produced by the customer during the period between May-2003 to June-2003, the respondent sold the goods in the open market resulting in evasion of duty. The Commissioner (Appeals) was of the opinion that the respondent failed to keep track of obtaining re-warehousing certificates from the consignees as required in terms of C.B.E. & C. Circular No. 579/16/2001-CX., issued under Rule 20(2) of Central Excise (No. 2) Rules, 2001. The Commissioner (Appeals), therefore, did not deem it fit to confirm the order of penalty and relying on some other cases decided by the Tribunal having similar facts it had allowed the appeal of respondent with regard to the penalty.

Respondent Contention:-The Respondent said that failed to keep track of obtaining re-warehousing certificates from the consignees as required in terms of C.B.E. & C. but not doing offence or any fraud.

Reasoning of Judgement:-The Tribunal was convinced by the reasoning given by Commissioner (Appeals) and held that respondent was not a guilty party to the procurement, or production, or production of fake CT-2 Certificate. The only lapse on its part is that it failed to keep track of obtaining re-warehousing certificate for which duty and interest demanded was paid and to that, no mala fide could be attributed to the respondent, the penal action according to the respondent could not have been sustained.

Relying on the decision of the Apex Court in the case of M/s. Dharamenclra Textile Processors - 2008 (231) E.L.T. 3 (S.C.), the Tribunal agreed that once the penalty was required to be imposed, there was no option to reduce the penalty except as provided by the Apex Court, but, in the instant case, in wake of clear findings of absence of mala fideon the part of the respondent, penalty actions were not to be attracted in the case of respondent. Single most conclusion based on the material placed before the Adjudicating Authorities was that no ill- intention or mala fide or fraud could be imputed on the respondent, and therefore, there was no attraction of provision imposing the penalty. This Court agrees with the sound reasoning given by the Tribunal. Grant of penalty would arise only in the event of adjudicating authority concluding mala fide intention in evasion of duty and mere demand of duty and interest would not ipso facto lead to penalty on conclusion of mala fide.In this background, the Appeal is required to be dismissed with Noquestion of law to be determined by this Court. Accordingly, Tax Appeal is dismissed.

Decision:- Appeal Dismissed.

Comment:- This is very good decision clearly saying that the party cannot be penalised for technical or venial breaches. The CT-2 certificate was genuine, all transactions were not fake. The only thing was that the party could keep the track record of re-warehousing certificate. The penalty can be imposed when there is malafide intention of the party which is completely absent. When the duty and interest has been confirmed but this itself prove the ill intention on the part of assesee. Hence the penalty should not be imposed on them.

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PJ/Case Laws/2012-13/1235

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