2010 (10) TMI 182 - AT - Central Excise

Penalty Delay payment of duty and interest beyond period of 30 days - penalty imposed under Rule 25 of the Central Excise Rules, 2002, the penalty under Rule 25 leviable subject to the provisions of Section 11AC and in this case - there is no allegation against the appellants that they have not paid the duty with any mala fide intentions - penalty under Rule 25 is not leviable against the appellants - liable for penalty under Rule 27 of the Central Excise Rules, 2002 - appeal partly allowed.

Summary

Issues: Penalty under Rule 25(1)(a) of Central Excise Rules, 2002 confirmed against the appellants. Reduction of penalty by the Commissioner (Appeals). Allegation of delayed payment without fraudulent intent. Applicability of penalty under Rule 25 and Rule 27 of Central Excise Rules, 2002.

The case involved the confirmation of a penalty under Rule 25(1)(a) of the Central Excise Rules, 2002 amounting to Rs. 2,00,000 against the appellants for delayed payment of duty between July 2006 and January 2007. The adjudicating authority initially confirmed the duty equivalent to the penalty, which was later reduced to Rs. 2 lakhs by the Commissioner (Appeals). The appellants contended that no penalty should be levied as there was no allegation of fraudulent intent or evasion of duty. They relied on a precedent where the Tribunal ruled that if duty was paid before the show cause notice and there was no intent to evade payment, the penalty was not sustainable.

The appellant argued that since there was no allegation of fraud, collusion, or intent to evade payment of duty, no penalty should be imposed. Citing a previous Tribunal decision, they emphasized that if duty was paid before the show cause notice and there was no intent to evade payment, the penalty was not justified. On the contrary, the Departmental Representative contended that mens rea was not necessary for imposing a penalty, referring to a Supreme Court case. After hearing both sides, the Tribunal acknowledged that the appellants had indeed contravened the law by not paying duty on time as required. However, since there was no evidence of mala fide intentions, the penalty under Rule 25 was deemed inapplicable.

The Tribunal concluded that while the appellants were liable for penalty under Rule 27 of the Central Excise Rules, 2002 due to the contravention of provisions, the penalty under Rule 25 was not justified in the absence of fraudulent intent. Consequently, the penalty under Rule 27 of Central Excise Rules, 2002 was confirmed at Rs. 2,000 for each default, totaling Rs. 2,000. The appeal was partly allowed based on these findings.

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