2010 (12) TMI 726 - AT - Central Excise

Confiscation - 100% EOU - Rule 25 and 26 of the Central Excise Rules, 2002 - The only allegation against the appellants is that they are not paying duty at the time of clearance as per Rule 17 of the Central Excise Rules, 2002 - When it is not alleged that there is any intention of the appellants to evade payment of duty, in that event, the allegation of mens rea cannot be alleged against the appellants - Decided in favor of the assessee

Summary

Issues:
Challenge to penalties imposed under Rule 25 and Rule 26 of the Central Excise Rules, 2002 by the Commissioner (Appeals).

Analysis:
The case involves a challenge to penalties imposed under Rule 25 and Rule 26 of the Central Excise Rules, 2002 by the Commissioner (Appeals). The appellants, a 100% EOU, sought clearance of finished goods in DTA from April 2005. They cleared goods under Rule 8, paying duty by the 5th of the following month. Allegedly, they did not pay duty at the time of clearance under Rule 17. Goods were detained, confiscated, and released under a provisional bond. A show-cause notice was issued for confiscation and penalties. The adjudicating authority confirmed confiscation and imposed penalties equivalent to duty under Rule 25 on the appellant and under Rule 26 on the Dy. General Manager. The appellants contended they were unaware of Rule 17, paid duty regularly, and had no intention to evade payment. They argued no mens rea was present, citing case law and Section 11A(2)(B) of the Central Excise Act, 1944.

The appellant's advocate argued that no mens rea was present, and no penalty should be levied. They contended that the show cause notice did not specify the provision for imposing a penalty, citing relevant case law. The advocate also highlighted that duty was paid before the notice was issued, invoking Section 11A(2)(B) of the Central Excise Act, 1944. The Departmental Representative argued that charges were clear in the notice, and the appellant's conduct showed a mala fide intention. The Departmental Representative contended that penalties under Rule 25 and Rule 26 were applicable due to the appellant's conduct.

The Tribunal noted that the appellants were 100% EOU, cleared goods in DTA from April 2005, paid duty under Rule 8, and filed returns regularly. The only allegation was non-payment of duty at the time of clearance under Rule 17. The Tribunal found no intention to evade payment, thus no mens rea was present, following a precedent from the Hon'ble High Court of Punjab and Haryana. Consequently, the Tribunal held that penalties under Rule 25 and Rule 26 were not applicable. The impugned order was set aside, and the appeal was allowed with any consequential relief.

This judgment clarifies the applicability of penalties under Rule 25 and Rule 26 of the Central Excise Rules, 2002 in cases where there is no intention to evade payment of duty, emphasizing the importance of mens rea in penalty imposition.