2010 (7) TMI 395 - AT - Central Excise

Penalty SSI unit chosen to pay duty - filed quarterly returns SCN issued, respondents have failed to file monthly returns and accordingly, they were required to show cause why penalty should not be imposed on them under Rule 27 of the Central Excise Rules - original authority held that the party committed offence 15 times, imposed penalty of Rs. 75,000/- 15 x 5000 under Rule 27 - Commissioner (Appeals) reduced the penalty of Rs. 75000/- imposed under Rule 27 by the original authority to Rs. 2,000/- - technical violation is clearly due to misunderstanding not only by the assesses but also by the officers of the Department - no minimum penalty prescribed under Rule 27 of the Central Excise Rules, 2002 - Leniency shown by the Commissioner (Appeals) is not unjustified - no valid grounds adduced to interfere with the order of the Commissioner (Appeals)

Issues:
1. Reduction of penalty under Rule 27 by Commissioner (Appeals).
2. Dispute regarding filing of returns by the respondents.
3. Review order passed by the Committee of Commissioners.
4. Default in filing monthly ER-1 return.

Analysis:

Issue 1: Reduction of penalty under Rule 27 by Commissioner (Appeals)
The appeal by the Department was against the order of the Commissioner (Appeals) reducing the penalty imposed under Rule 27 from Rs. 75,000 to Rs. 2,000. The respondents, an SSI unit, filed quarterly returns instead of monthly returns as required. The original authority imposed the penalty based on the number of alleged offenses. However, the Commissioner (Appeals) considered the circumstances, including the acceptance of quarterly returns by the Department, and reduced the penalty significantly. The Department challenged this reduction, but the Tribunal upheld the Commissioner's decision, citing lack of evasion and a technical misunderstanding as reasons for leniency.

Issue 2: Dispute regarding filing of returns by the respondents
The dispute revolved around the respondents' filing of returns for the period April 2006 to June 2007. The respondents, eligible for exemption, chose to pay duty instead of availing the exemption due to customer requirements for CENVAT credit. The Department alleged non-filing of monthly returns, leading to the penalty under Rule 27. The Commissioner (Appeals) acknowledged the quarterly returns filed by the respondents and reduced the penalty considering their status as an SSI unit and the historical acceptance of their filing frequency.

Issue 3: Review order passed by the Committee of Commissioners
The Committee of Commissioners reviewed the order of the Commissioner (Appeals) and decided to file an appeal against it. However, the Tribunal noted that the grounds for challenging the Commissioner's decision were not substantial. The Tribunal observed that the Department's pursuit of the issue lacked valid reasons, especially considering the regular acceptance of quarterly returns by the officers. The Tribunal criticized the review for lacking proper justification and upheld the Commissioner's decision.

Issue 4: Default in filing monthly ER-1 return
The Department alleged that the party defaulted in filing the monthly ER-1 return 12 times during a specific period. The grounds of appeal questioned the exclusion of certain months from the total defaults by the Commissioner (Appeals). However, the Tribunal found the Department's focus on this issue to be disproportionate, emphasizing that there was no evasion of excise duty and the technical violation stemmed from misunderstandings by both the assesses and the Department officers. The Tribunal rejected the appeal, highlighting the lack of valid grounds to interfere with the Commissioner's decision.

In conclusion, the Tribunal upheld the Commissioner (Appeals)'s decision to reduce the penalty under Rule 27, emphasizing leniency due to the technical nature of the violations and lack of evasion. The Tribunal also criticized the Department's pursuit of the appeal, finding it unjustified and lacking valid reasons.

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