2011 (2) TMI 906 - AT - Central Excise

Penalty - wrong filing of return - There is no dispute about the fact that the appellant in this case even after opting out of SSI exemption w.e.f. 1/4/06 continued to file quarterly returns in ER-3 format instead of ER-1 return on monthly basis and thus there is contravention of the provisions of Rule 12 (1) for which penalty under Rule 27 would be attracted - However the lower authorities have imposed total penalty of Rs. 70, 000/- i.e. Rs. 5, 000/- each for each failure which is too harsh and there is no justification for such penalty as during this period the quarterly returns were being acknowledged by the Range Officers and they did not raise any objection or told the assessee to file monthly return - Thus there is contravention of the provisions of Rule 12 (1) of Central Excise Rules 2002 attracting penalty under Rule 27 and upholding the imposition of penalty under Rule 27 of the Central Excise Rules 1944 the quantum of penalty is reduced to Rs. 5, 000 - The appeal is partially allowed.

Summary

Issues:
Failure to file monthly return after switching from SSI exemption to normal duty, Imposition of penalty under Rule 27 of Central Excise Rules, 2002, Quantum of penalty imposed.

Analysis:
The case involved the appellant who had been availing Small Scale Industries (SSI) exemption under Notification No. 9/2003-CE but switched to paying duty at the normal rate from 1/4/06 onwards. Despite the requirement for units paying normal duty to file monthly returns in ER-1 format, the appellant continued to file quarterly returns for about 14 months until prompted by the Department. Subsequently, the Department initiated penalty proceedings under Rule 27 of the Central Excise Rules, 2002, and imposed a total penalty of Rs. 70,000 on the appellant for failure to file monthly returns, amounting to Rs. 5,000 for each instance.

The appellant argued that the quarterly filings were due to ignorance and were acknowledged by the Range Officer without objection, leading them to believe they were compliant. The appellant contended that the penalty was too harsh and cited a Tribunal judgment to support their case. On the other hand, the Departmental Representative defended the penalty, stating that the appellant should have switched to filing monthly returns upon opting out of the SSI exemption scheme and that the penalty was justified under Rule 27 for contravention of Central Excise Rules.

Upon considering the submissions, it was established that the appellant indeed contravened Rule 12 (1) of the Central Excise Rules by filing quarterly returns instead of the required monthly returns after opting out of SSI exemption. While upholding the imposition of penalty under Rule 27, the Tribunal found the total penalty of Rs. 70,000 to be excessive. The Tribunal noted that the quarterly returns were acknowledged by Range Officers without objections and contained all necessary details. Consequently, the quantum of penalty was reduced to Rs. 5,000 for each instance of non-compliance, resulting in a partial allowance of the appeal.