2009 (11) TMI 704 - AT - Central Excise

Summary

Issues:
- Imposition of penalty under Rule 25 read with Section 11AC of the Central Excise Act.

Detailed Analysis:

Issue 1: Imposition of Penalty under Rule 25 read with Section 11AC
The central question in this case was whether a penalty should be imposed on the appellant under Rule 25 in conjunction with Section 11AC of the Central Excise Act. The appellant had already paid the differential duty on the goods in question along with interest. A penalty of Rs. 22,000 was imposed on the appellant under Rule 25 by the adjudicating authority, who opined that Section 11AC was not applicable. The Commissioner (Appeals) upheld the penalty under Rule 25, citing that the appellant had contravened rules by removing goods. The appellant contended that the penalty was arbitrary and lacked legal basis, emphasizing the absence of mens rea and evidence indicating intent to violate rules. The appellant argued that the penalty was imposed on mere suspicion or assumption without factual support in the show-cause notice. The appellant relied on precedents where penalties were deemed unsustainable when the relevant rule clauses were not specified in the notice.

Issue 2: Allegations and Evidence in Show-Cause Notice
The appellant argued that the penalty under Rule 25 could not be sustained as the show-cause notice did not specify the relevant clause (a) of the rule or provide evidence of contravention of rules. The appellant highlighted the necessity for the department to allege requisite facts in the notice when invoking a provision against the party. The Tribunal emphasized that for invoking clause (a) of Rule 25, the show-cause notice must allege the removal of excisable goods in contravention of rules or notifications, specifying the identity of goods, the fact of removal, and the specific rule or notification breached. The Tribunal noted that the department's failure to allege these facts in the notice rendered the penalty unsustainable. The Tribunal referred to established case law requiring the department to include necessary facts in the show-cause notice when invoking a provision, failing which the penalty cannot be upheld.

Conclusion:
The Tribunal found that the penalty imposed under Rule 25 was unsustainable due to the absence of requisite facts in the show-cause notice, leading to the penalty being vacated. The appeal was allowed in favor of the appellant, emphasizing the importance of alleging necessary facts in the notice when invoking a penalty provision.