2005 (5) TMI 567 - AT - Central Excise

Summary

Issues:
1. Imposition of penalty under Central Excise Rules for clearing finished goods as samples without duty payment.
2. Appeal against the order setting aside the penalty by the Commissioner (Appeals).

Analysis:

Issue 1: Imposition of Penalty under Central Excise Rules
The case involved the appellant clearing finished goods as samples without paying duty and without issuing a Central Excise invoice. The original authority imposed a penalty of Rs. 1,50,000 under Rules 9(2) and 173Q of the Central Excise Rules, 1944. However, the Commissioner (Appeals) set aside the penalty based on the judgment of the Hon'ble Madras High Court in the case of DCW Ltd. v. ACCE, where it was found that there was no intention to evade duty, and the goods were cleared under a genuine belief that duty was not applicable to free supplies. The Commissioner (Appeals) noted that the appellant rectified the mistake promptly by paying the duty upon realizing the error.

Issue 2: Appeal Against Setting Aside of Penalty
The Revenue was aggrieved by the order of the Commissioner (Appeals) and sought the restoration of the penalty imposed in the original order. The Tribunal, after hearing both sides, found that the Commissioner (Appeals) had correctly analyzed the facts of the case. The Tribunal agreed with the Commissioner's decision that penalty proceedings were not warranted in this case, as there was no mala fide intent in clearing the free samples. The Tribunal cited various judgments, including Rashtriya Ispat Nigam Ltd. v. CCE, where it was held that penalty is not applicable if duty is paid promptly before the issuance of a show-cause notice (SCN). The Tribunal also referred to other cases like CCE v. Sterlite (India) Ltd. and Collector v. HMM Ltd., supporting the view that penalty should be set aside when duty is paid before the SCN is issued.

In conclusion, the Tribunal upheld the order of the Commissioner (Appeals) and dismissed the appeal, stating that the penalty was not justified in this case. The judgment emphasized the importance of prompt duty payment upon realization of the error and highlighted the absence of any fraudulent intent in the actions of the appellant.