Whether contravention of Rule 8(3A) of the CER, 2002 attracts provisions of Rule 25 read with section 11AC ?

PJ/Case Law/2014-15/2138

Case:- TRUEFIT ENGG CO LTD Vs COMMISSIONER OF CENTRAL EXCISE, THANE- I

Citation:- 2014-TIOL-390-CESTAT-MUM

Brief facts:- A penalty of Rs. 9,93,558/- had been imposed on the appellant for contravention of Rule 8 (3A) of the Central Excise Rules, under Rule 25 of the Central Excise Rules, 2002. The facts of the case were that he appellant failed to pay their excise duty within 30 days of the due date and as per Rule 8(3A), they were required to pay duty for the future period through PLA without utilizing their Cenvat credit account, but as the appellant had paid the duty by utilizing cenvat credit account, therefore they have contravened the provisions of Rule 8(3A) of the Rules. Accordingly, the penalty under Rule 25 of the Central Excise Rules, 2002 had been confirmed against the appellant, equivalent to duty.

Appellant’s contentions:- It was the contention of the appellant that as the appellant had not contravened the provisions of Section 11AC of the Central Excise Act, therefore Rule 25 of the Central Excise Rules, 2002 for imposing penalty for contravention of Rule 8(3A) was not applicable. To support this contention, he relied on the decision of the Tribunal in the case of Solar Chemferts Pvt. Ltd. vs. CCE, Thane–I reported in 2012 (276) ELT 273 = (2011-TIOL-1968-CESTAT-MUM). He also relied on the decision of the Hon'ble Gujarat High Court in the case of CCE vs. Saurashtra Cement Ltd. reported in 2010 (260) ELT 71 (Guj.) = (2010-TIOL-889-HC-AHM-CX).

Respondent’s contentions:- On the other hand, the learned AR opposed the contention of the counsel and submitted that as the appellant had contravened the provisions of Rule 8(3A), the same was covered by Rule 25 of the Central Excise Rules, 2002 for imposing penalty, therefore the impugned order was to be upheld.

Reasoning of judgment:- Considering the submissions of both sides, Hon’ble judge found that although the appellant had contravened the provisions of Rule 8(3A) of the Central Excise Rules, 2002, but the intent to evade payment of duty was missing. Therefore, the provisions of Section 11AC of the Central Excise Act were not attracted. Accordingly, penalty under Rule 25 of the Central Excise Rules was not permissible, but penalty under Rule 27 of the Rules was to be imposed. As the appellant had contravened the provisions of Rule 8(3A), therefore, following the decision of Solar Chemferts (supra), Penalty of Rs. 5,000/- each on the appellants was imposed. With these terms, the appeals were disposed of along with stay applications.

Decision:- Appeals were disposed off.

Comment:- The analogy drawn from the case is that if the assessee contravenes the provisions of Rule 8(3A) of the Central Excise Rules, 2002, the intent to evade payment of duty is missing so the provisions of Section 11AC of the Central Excise Act cannot be attracted and no penalty could be imposed under Rule 25 of the Central Excise Rules. The only penalty that can be imposed is under Rule 27 of the Central Excise Rules, 2002.

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PJ/Case Law/2014-15/2138

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