2011 (11) TMI 154 - AT - Central Excise

Waiver of penalty imposed under Rule 25 of the Central Excise Rules, 2002 - demand imposed by denying assessee SSI exemption under Notification No.8/2003 CE dated 01.03.2003 - duty liability is not disputed Held that - An assessee shall not be penalized in a case where the demand on them defended on interpretation of the conditions of the exemption notification claimed by the assessee. The plea for vacating the penalty is tenable.

Summary

Issues:
Challenge against penalty imposed under Rule 25 of Central Excise Rules, 2002.

Analysis:
The appeal was filed by the assessee challenging a penalty of Rs. 15,000 imposed on them under Rule 25 of the Central Excise Rules, 2002. The original authority confirmed a demand of Rs. 4,39,440 for a specific period against the assessee by denying them SSI exemption under Notification No. 8/2003 CE. The duty paid on an intermediate product was allowed as CENVAT credit. Additionally, interest under Rule 8 of the Central Excise Rules, 2002, along with Section 11AB of the Central Excise Act, was held payable by the assessee. The Commissioner (Appeals) upheld the order of adjudication, leading to the present appeal before the Tribunal.

The managing partner of the appellant-firm stated that the duty was voluntarily paid, asserting no intent to evade duty. It was mentioned that the duty liability was not known during the material period, and thus duty was not collected from buyers. The appellant did not dispute the duty liability and requested the penalty to be set aside.

After considering the submissions, the Tribunal found the plea for vacating the penalty to be valid in the peculiar circumstances of the case. It was observed that the dispute between the department and the assessee centered around whether the value of the intermediate product should be included in the gross value of clearances for the fiscal year. The decision hinged on the interpretation of the relevant conditions of the notification. The Tribunal noted that when a demand is based on the interpretation of exemption notification conditions claimed by the assessee, the assessee should not be penalized. Citing previous judgments, the Tribunal set aside the penalty and allowed the appeal.

In conclusion, the Tribunal ruled in favor of the appellant, setting aside the penalty imposed under Rule 25 of the Central Excise Rules, 2002, based on the interpretation of the exemption notification conditions.