2005 (9) TMI 518 - AT - Central Excise

Summary

Issues:
1. Imposition of penalty on appellants for duty paid before the issue of Show Cause Notice.

Analysis:
The case involved an appeal against the imposition of penalties on the appellants for duty paid before the issuance of the Show Cause Notice. The appellants, a Small Scale Industry (SSI) engaged in job work activities, had paid duty as pointed out by the audit team before the notice was issued. The adjudicating authority confirmed the duty paid and imposed a penalty of Rs. 2000. Subsequently, the Commissioner (Appeals) imposed an additional penalty of Rs. 43,953. The key contention was whether penalties could be imposed when duty had been paid before the issuance of the Show Cause Notice.

The learned Advocate for the appellants argued that the penalties imposed were contrary to settled law, citing the case of Machino Montell and Shree Krishna Pipe Industries. These cases held that penalties and interest are not imposable if duty has been paid before the issuance of the notice. The Advocate did not contest the Rs. 2,000 penalty. On the other hand, the Departmental Representative argued that the appellants, working under Self Removal Procedure (SRP), were obligated to strictly follow the law, justifying the penalties imposed by the Commissioner (Appeals).

Upon perusing the records, the Tribunal found that the duty had indeed been paid by the appellants before the Show Cause Notice was issued. The Tribunal noted that the appellants, being an SSI industry, may have misunderstood the provisions, but had acted in good faith by paying the duty promptly. Citing the decision of the Larger Bench in the Machino Montell case, the Tribunal allowed the appeal against the penalties imposed by the Commissioner (Appeals). The Tribunal directed the appellants to pay the original penalty of Rs. 2,000 as imposed by the adjudicating authority, if not already paid. The appeals were allowed on this basis.

In conclusion, the Tribunal ruled in favor of the appellants, holding that penalties should not have been imposed for duty paid before the Show Cause Notice. The decision was based on the principle that penalties and interest are not applicable in such circumstances, as established by relevant legal precedents. The Tribunal's judgment emphasized the appellants' good faith compliance and the misunderstanding arising from their status as a Small Scale Industry, ultimately overturning the additional penalties imposed by the Commissioner (Appeals).