2009 (11) TMI 781 - AT - Central Excise

Summary

Issues:
Appeal against penalty imposition for receiving consignments without proper documentation under Central Excise Rules, 2001.

Detailed Analysis:
The case involved an appeal against a penalty imposed by the original authority, which was partially sustained by the Commissioner (Appeals). The penalty was related to the receipt of naphtha consignments without proper documentation under the Central Excise (Removal of Goods on Concessional Rate of Duty for Manufacture of Excisable Goods) Rules, 2001. The appellant, a fertilizer manufacturer, received naphtha from Indian Oil Corporation (IOC) without paying duty, following the procedure under the erstwhile Central Excise Rules, 1944. However, a show cause notice was issued alleging a violation of rules, leading to the imposition of a penalty of Rs. 44,71,902/-, later reduced to Rs. One lakh by the Commissioner (Appeals).

The appellant argued that they were eligible to receive duty-free naphtha for fertilizer manufacturing, had historically followed the Chapter X procedure under the old rules, and received the consignments in good faith, with no intent to evade duty. They contended that any violations were technical and primarily the responsibility of the dispatching party, IOC. The appellant claimed that the change in law introduced confusion during the transition period from the old to the new Central Excise Rules.

On the other hand, the Departmental Representative (SDR) argued that the penalty was justified as the appellant did not adhere to the prescribed procedure under Notification 34/2001. The SDR supported the Commissioner (Appeals)' decision to reduce the penalty amount.

After considering both sides' arguments, the Judge noted that the consignments were received during the transition between the old and new Central Excise Rules. The Judge found merit in the appellant's claim that they followed the previous procedure in good faith, and any omissions were technical in nature. Notably, the Central Excise officers had warehoused the goods without alleging collusion. The Judge highlighted that there was no deliberate intention on the appellant's part to bypass the new rules. Additionally, the Judge mentioned separate proceedings against IOC for duty demands, indicating that the issue primarily lay with the dispatching party. Consequently, the Judge ruled in favor of the appellant, setting aside the sustained penalty and granting consequential relief.

In conclusion, the judgment favored the appellant, emphasizing the technical nature of any omissions in following the new rules during the transitional phase, ultimately leading to the penalty imposition being overturned.