2011 (5) TMI 500 - AT - Central Excise

Quantum of residual penalty under central excise - Held that - The appellate authority after rightly observing on the interpretation of Provisions of Rule 27, has proceeded to impose penalty of Rs.5,000/- in respect of each contravention - As such, contravention of any number of rules would invite penal action under Rule 27 to the extent of Rs.5,000/- Reference under Rule 27 is to the terms Rules and not Rule - As such, separate penalty of Rs.5,000/- cannot be imposed for contravention of each and every Rule - As long as there is only one Show Cause Notice invoking Rule 27, maximum penalty to the extent of Rs.5,000/- is imposable - Accordingly, reduce the penalty from Rs.15,000/- to Rs.5,000/-.

Summary

Issues: Interpretation of Rule 27 of Central Excise Rules, 2002 regarding the imposition of penalty exceeding Rs.5,000 for contraventions of multiple rules.

In this judgment by the Appellate Tribunal CESTAT, AHMEDABAD, the issue revolved around the interpretation of Rule 27 of the Central Excise Rules, 2002 concerning the imposition of penalties. The appellant challenged the penalty imposed by the Commissioner(Appeals), arguing that Rule 27 allows for a maximum penalty of Rs.5,000 for each offense. The Commissioner(Appeals) had imposed a penalty of Rs.15,000 on the appellant for contraventions related to non/late filing of ER-4, ER-5, and ER-6 returns. The Tribunal noted that Rule 27 specifies a penalty not exceeding Rs.5,000 for breaches of the rules, with no provision for higher penalties. The Tribunal agreed with the appellant's advocate that penalties under Rule 27 should not be imposed separately for contraventions of each rule mentioned in a single Show Cause Notice. Therefore, the Tribunal reduced the penalty from Rs.15,000 to Rs.5,000, aligning with the interpretation that a maximum penalty of Rs.5,000 applies as long as there is only one Show Cause Notice invoking Rule 27.

The Tribunal emphasized that the plural term "Rules" in Rule 27 refers to contraventions of multiple rules collectively, not individual rules. The judgment clarified that the penalty under Rule 27 cannot be multiplied for each rule contravened when a single Show Cause Notice addresses multiple rule violations. The Tribunal's decision highlighted the importance of correctly interpreting the language of the rule to determine the appropriate penalty for breaches. By reducing the penalty to Rs.5,000, the Tribunal maintained consistency with the legislative intent behind Rule 27, ensuring that penalties are proportionate and aligned with the specified limits in the rule. The judgment concluded by disposing of the Stay Petition and appeal in light of the revised penalty amount, providing a clear resolution to the issue raised by the appellant regarding the penalty imposition.