2010 (12) TMI 316 - AT - Central Excise

Penalty - Delay in payment of duty - Commissioner has imposed a penalty of Rs. 5 lakh under Rule 25(1)(a) read with Rule 8(3) of Central Excise Rules 2002 - the goods cleared in December 2006 on which the duty has not been paid by the due date is offending goods and the penal action and consequences follow - appellant submits that due to financial crisis they defaulted in payment of duty in respective clearances made in December 2006 but they have followed the restrictions prescribed under Rule 8(3A) by paying duty on consignment basis and without utilising the Cenvat credit and therefore leniency should be shown. - Held that Penalty reduced from 5 lakhs to 1.5 lakhs.

Summary

Issues:
Appeal against penalty imposed for default in duty payment.

Analysis:
The appeal was against a penalty of Rs. 5 lakhs imposed by the Commissioner due to default in payment of duty amounting to Rs. 52,93,525/- in December 2006. The appellant paid the amount with interest in June 2007, after clearing dues from January to June 2007 on a consignment basis without utilizing Cenvat credit. The penalty was imposed under Rule 25(1)(a) read with Rule 8(3) of Central Excise Rules 2002.

The appellant argued that once the defaulted amount with interest is paid, no further penal action is required as per Rule 8(3A) of the Central Excise Rules 2002. The appellant contended that they followed the prescribed restrictions by paying duty on consignment basis without using Cenvat credit due to financial crisis. The appellant sought leniency based on these grounds.

The Tribunal examined the relevant provisions of Rule 8 of the Central Excise Rules 2002. It was noted that the default in duty payment for December 2006 led to restrictions on subsequent clearances until the dues were cleared, as per Rule 8(3A). The Tribunal rejected the argument that only clearances after December 2006 should be considered offending goods, stating that the main violation was in respect of clearances made in December 2006. The Tribunal upheld that penal action and consequences applied to goods cleared in December 2006 without duty payment by the due date.

After considering the submissions and circumstances, the Tribunal reduced the penalty from Rs. 5 lakhs to Rs. 1,50,000/-, showing leniency due to the financial crisis faced by the appellant. The appeal was disposed of with the reduced penalty amount.