2007 (3) TMI 549 - AT - Central Excise

Summary

Issues:
Challenge to penalty imposed under Rule 25 of the Central Excise Rules, 2002.

Analysis:

1. The appellate authority upheld the penalty imposed on the appellant based on the findings that the goods were procured with the intent to evade duty by diverting them in the local market and substituting them before export. Although no actual contravention under the Central Excise Rules or related notifications was committed in respect of the goods, the procurement of goods for the purpose of export but actually diverting them in the local market without payment of duty warranted penalization. The penalty under Rule 25 was upheld due to the fabrication of false evidence of export by substituting the goods with soapstone powder. The Commissioner (Appeals) highlighted the deceptive practices employed by the appellant, leading to the imposition of the penalty.

2. The appellant argued that the penalty was being imposed for past contraventions and the likelihood of a repeat offense in the present proceedings. However, separate proceedings had already been initiated regarding past clearances. The appellate authority's observations indicated that the penalty imposition was not justified in the current case. The absence of a specific proposal in the show cause notice to impose a penalty was also noted, despite some paragraphs discussing the appellant's liability to penalty. The notice only called upon the appellant to show cause regarding the confirmation of penalty, interest, and liability of goods to confiscation, failing to provide a clear opportunity to address the imposition of the penalty. The appellant's contention that the impugned order exceeded the scope of the show cause notice was deemed valid.

3. Consequently, the penalty imposed on the appellant was set aside, as it was found unjustified based on the circumstances and procedural irregularities highlighted during the proceedings. The decision focused solely on the penalty issue, refraining from expressing any views on other aspects of the orders. The judgment concluded by pronouncing the setting aside of the penalty in favor of the appellant.