2008 (12) TMI 567 - AT - Central Excise

Penalty - Intent to evade - Held that - it has not been established that the appellants violated deliberately the Central Excise provisions with an intention to evade Central Excise duty - Moreover, when we go through Rule 25, it is seen that the contravention of any provisions of the Rules or Notifications should be with an intent to evade duty, so as to attract penalty under the said Rule 25. In the circumstance of the case, we are satisfied that no penalty is called for in terms of Rule 25. Moreover, the appellant is a public sector undertaking contributing huge money to the exchequer. These factors are to be taken into consideration while imposing penalty, in view of the above observations, we set aside the penalty and allow the appeal.

Summary

Issues:
Violation of Central Excise Law leading to penalty imposition under Rule 25 of the Central Excise Rules, 2002.

Analysis:
The appeal was filed against Order-in-Original No. 12/2004, dated 30-9-2005, passed by the Commissioner of Central Excise and Customs, Visakhapatnam-I Commissionerate. The appellants, who are manufacturers of petroleum products, cleared furnace oil in bond to HPCL Vasco Terminal in May 2003 under AR-3. However, before receiving the goods, the Vasco Terminal sold them to M/s. Tata Power Company, which was a contravention of the Central Excise Law. Upon discovering this, the appellants promptly paid the duty and interest. The revenue proceeded against the appellants for the violation, leading to the imposition of a penalty of Rs. 25,00,000 under Rule 25 of the Central Excise Rules, 2002.

The learned Consultant representing the appellants argued that the contravention was unintentional, emphasizing the lack of intent to evade duty. He highlighted the appellants' status as a significant revenue contributor to the exchequer and the sporadic nature of the incident. On the other hand, the Departmental Representative pointed out the delay between the goods' removal and the payment of duty, emphasizing the appellants' familiarity with Central Excise procedures and the need for penalties to ensure compliance.

Upon careful consideration, the Tribunal found that there was no deliberate violation of Central Excise provisions with an intent to evade duty. Rule 25 specifies that a contravention must be accompanied by an intent to evade duty for a penalty to be imposed. Given the circumstances and the appellants' substantial contributions to the exchequer as a public sector undertaking, the Tribunal concluded that no penalty was warranted under Rule 25. Therefore, the penalty was set aside, and the appeal was allowed.

This judgment highlights the importance of intent in penalty imposition under Rule 25 of the Central Excise Rules, 2002, and the consideration of factors such as the entity's contribution to the exchequer when determining penalties for violations of Central Excise provisions.