2015 (6) TMI 1040 - AT - Central Excise

Non-payment of the Central Excise Duty liability - Confirmation of demand and penalty - Held that - Duty liability has been discharged by the appellant on each and every clearance of the finished product from the factory by utilizing cenvat credit, such payment is in conformity with the above statutory provisions. Thus, confirmation of the duty demand by the authorities below is not in agreement with the statutory mandate. Imposition of penalty under Rule 25 of the Central Excise Rules read with section 11 AC of the Central Excise Act 1944 has no application in the present case, inasmuch as, non-payment of duty as prescribed in Rule 8 (3A) of the Central Excise Rules, 2002 is not attributable to suppression, wilful misstatement or contravention of any of the provisions of the Rules, with intent to evade payment of duty Considering the fact that the duty attributable to removal of excisable goods has not been paid by the appellant within the stipulated time, the provisions of Central Excise Rules, 2002 have been violated, for which penalty can be imposed under Rule 27 of the rules. Accordingly, penalty imposed in the adjudication order and confirmed in the impugned order are set aside and the same is restricted to ₹ 5,000/- under Rule 27 of the rules. Since there is no element of mensrea in the present case, imposition of penalty on the Director of the company is not justified and accordingly, the impugned order confirming the penalty amount on the Directors is set aside.

Summary

Issues: Central Excise Duty liability payment within stipulated time frame; Interpretation of Rule 8 (3A) regarding utilization of cenvat credit; Imposition of penalty under Rule 25 and Rule 27; Penalty on Director of the company.

Central Excise Duty Liability Payment: The appellant declared a duty liability of Rs. 12,06,743/- for April 2012, paying Rs. 7,06,743/- within the prescribed time frame and the balance through PLA. The Department initiated proceedings for non-payment within the stipulated time, resulting in a duty demand confirmation in the adjudication order dated 30.10.2013. The appeal against this order upheld the duty demand and reduced the penalty on the Managing Director.

Interpretation of Rule 8 (3A): The appellant argued that the phrase "without utilizing cenvat credit" in sub-rule (3A) of Rule 8 was invalidated by the Gujarat High Court, allowing for cenvat credit utilization for duty payment at the time of removal. As the appellant had discharged duty liability for each consignment by debiting the cenvat account, compliance with the rule was claimed, negating the need for duty demand confirmation.

Imposition of Penalty - Rule 25 and Rule 27: The Tribunal found that penalty under Rule 25 was not applicable as non-payment of duty did not involve suppression, wilful misstatement, or contravention to evade payment. Citing a judgment, it concluded that the penalty imposed was not legal. However, a penalty under Rule 27 for violation of Central Excise Rules, 2002 was deemed appropriate, restricting it to Rs. 5,000. The absence of mens rea led to the setting aside of the penalty on the Director.

The Tribunal disposed of the appeals by setting aside the penalty on the Director, restricting the penalty amount under Rule 27, and ruling against the confirmation of duty demand due to compliance with cenvat credit utilization.