2008 (11) TMI 569 - AT - Central Excise

Summary

Issues:
- Appeal against Order-in-Appeal No. 47 & 48/2007 dated 2-8-2007 passed by the Commissioner of Central Excise, Customs & Service Tax (Appeals), Guntur.
- Non-payment of duty liability of Rs. 4,75,941 by 100% E.O.U. manufacturers of cotton yarn and combed yarn.
- Imposition of penalty under Rule 25 of the Central Excise Rules.
- Reduction of penalty by the Commissioner (Appeals) and subsequent appeal by the manufacturers.
- Arguments based on absence of mala fide intent and financial constraints leading to non-payment of duty.
- Reference to various tribunal and court decisions to support the appeal.
- Consideration of facts by the Appellate Tribunal and decision on the penalty amount.

Analysis:
The case involved an appeal against an order passed by the Commissioner of Central Excise, Customs & Service Tax (Appeals), Guntur, regarding the non-payment of duty liability amounting to Rs. 4,75,941 by manufacturers of cotton yarn and combed yarn, who were 100% Export-Oriented Units (E.O.U.). The lower authority confirmed the demand and imposed a penalty on the manufacturers and an individual. Upon appeal, the Commissioner (Appeals) reduced the penalty imposed under Rule 25 of the Central Excise Rules from Rs. 1,25,000 to Rs. 50,000 and set aside the penalty on the individual. The manufacturers contested the decision, arguing that there was no mala fide intent and the non-payment was due to financial difficulties. They highlighted that the duty was paid before the issuance of a show cause notice, citing various tribunal and court decisions to support their stance.

Upon careful consideration, the Appellate Tribunal acknowledged that the manufacturers had cleared goods without paying duty, despite being aware of their duty liability. Even though there was no intent to evade payment, the goods were cleared without duty payment, as indicated in the monthly return without specifying duty particulars. The Tribunal noted the delay in discharging the duty liability even after it was pointed out. Despite recognizing the technical lapse in not mentioning the sub-rule for penalty imposition, the Tribunal concluded that a penalty was warranted. However, considering the submissions made, the Tribunal decided to reduce the penalty from Rs. 50,000 to Rs. 25,000. The appeal was disposed of based on these findings, emphasizing the duty obligation and the need for timely compliance despite financial challenges.

This case underscores the importance of fulfilling duty obligations promptly, even in the face of financial difficulties, to avoid penalties. The Tribunal's decision balanced the acknowledgment of financial constraints with the necessity of adhering to duty payment regulations. The reference to previous legal precedents and the consideration of intent and circumstances showcase a nuanced approach to penalty imposition in excise duty cases, emphasizing compliance while taking into account mitigating factors.