2011 (11) TMI 198 - AT - Central Excise

Plea for leniency in penalty - penalty imposed under Rule 25(1) & 27 of Central Excise Rules, 2002 Non-discharge of duty liability within the time frame as enumerated in Rule 8 of the Central Excise Rules, 2002 return filed late - factory closed thereafter Held that - Due to financial difficulty the appellant paid the amount even though belatedly with interest, hence, lenient view as regards penalty is justified in this case. Penalty is thus reduced. - Decided in favor of assessee.

Summary

Issues:
1. Timely discharge of duty liability under Rule 8 of the Central Excise Rules, 2002.
2. Imposition of penalties under Rule 25(1) and Rule 27 of Central Excise Rules, 2002 for late payment and filing of return.
3. Consideration of financial difficulty leading to factory closure as a mitigating factor for penalty reduction.

Issue 1: Timely discharge of duty liability under Rule 8 of the Central Excise Rules, 2002:
The appellant paid the duty due for October 2008 partially from their CENVAT account, resulting in a shortfall against the total liabilities for that month. Subsequently, the remaining amount along with interest was paid after significant delays. The lower authority observed a failure to discharge duty liability within the stipulated timeframe as per Rule 8 of the Central Excise Rules, 2002. The appellant also did not issue any invoices after a certain date, indicating operational issues within the factory.

Issue 2: Imposition of penalties under Rule 25(1) and Rule 27 of Central Excise Rules, 2002 for late payment and filing of return:
Penalties amounting to Rs.50,000 under Rule 25(1) and Rs.1,000 under Rule 27 of the Central Excise Rules, 2002 were imposed on the appellant for delayed payment and late filing of return for October 2008. Despite the appellant's subsequent payments and explanations for the delays, the appeal challenging the penalties was rejected.

Issue 3: Consideration of financial difficulty leading to factory closure as a mitigating factor for penalty reduction:
The appellant's counsel argued that the factory closure in October 2008 due to financial difficulties was the reason for the default and subsequent delays in payment. Seeking leniency, the counsel highlighted the challenges faced by the appellant. Considering the financial hardship leading to the factory closure and the eventual payment made by the appellant with interest, the presiding authority decided to reduce the penalty under Rule 25(1) to Rs.5,000 as a justified lenient view in light of the circumstances.

In conclusion, the appellate tribunal acknowledged the financial challenges faced by the appellant due to the factory closure and the subsequent delays in payment. While upholding the liability for duty payment, the tribunal reduced the penalty under Rule 25(1) to Rs.5,000, recognizing the mitigating circumstances. The appeal was allowed in favor of the appellant with the revised penalty amount.