2011 (9) TMI 642 - AT - Central Excise

Penalty under Rule 25 - Returns for Feb07 Dec07 not filed - Duty paid utilizing Cenvat Credit - Held - Where duty remained outstanding beyond a period of 30 Days it is to be paid at the time of removal without availing Cenvat Credit. The non compliance will result in penalty.

Summary

Issues involved:
1. Default in monthly payment of duty and imposition of penalty.
2. Applicability of penalty under Rule 25 and Rule 27.
3. Interpretation of Rule 8(3A) of CENVAT Credit Rules, 2002.
4. Justifiability and reduction of penalty amount for a Small Scale Industry (SSI) unit.

Issue 1: Default in monthly payment of duty and imposition of penalty:
The appellant failed to file monthly returns within the stipulated time for several months and defaulted in monthly payment of duty. The total duty involved in the default period was Rs.8,66,642, out of which only a partial amount was paid from PLA, and the rest was paid from the CENVAT account. Consequently, penalties were imposed under Rule 25 and Rule 27 of the Rules. The appellant argued against the penalties, citing the absence of fraud or malafide intention. The appeal primarily focused on the penalty issue, leading to the waiver of the pre-deposit requirement.

Issue 2: Applicability of penalty under Rule 25 and Rule 27:
The appellant contended that the penalty under Rule 25 was harsh, especially considering the SSI unit status and absence of intentional wrongdoing. The appellant referenced various decisions to support the argument that penalty under Rule 27 should suffice. However, the Tribunal noted that the cited decisions were rendered before the amendment of Rule 8(3A) of the Rules. The Tribunal highlighted that the default in this case required duty payment for each consignment without utilizing CENVAT Credit, making the penalty under Rule 25 applicable. The penalty under Rule 27 was upheld due to the non-filing of monthly returns.

Issue 3: Interpretation of Rule 8(3A) of CENVAT Credit Rules, 2002:
The Tribunal analyzed the evolution of Rule 8(3A) from its introduction to subsequent amendments. The rule mandated duty payment for each consignment in case of default beyond 30 days, without the facility of monthly payment or CENVAT Credit utilization. The responsibility to pay duty consignment-wise was placed on the assessee, and failure to do so resulted in deemed clearance without payment of duty, attracting penalties as per the Rules.

Issue 4: Justifiability and reduction of penalty amount for a Small Scale Industry (SSI) unit:
Considering the appellant's SSI unit status and the absence of fraudulent intent, the Tribunal reduced the penalty amount under Rule 25 from Rs.2 lakhs to Rs.25,000. This reduction took into account the reasons presented by the appellant and the nature of the default as a case of deemed removal without payment of duty. The penalty under Rule 27 for non-filing of monthly returns was upheld, acknowledging the appellant's status as an SSI unit.

This comprehensive analysis of the judgment highlights the key issues addressed by the Tribunal concerning the default in duty payment, imposition of penalties under different rules, interpretation of relevant provisions, and the justifiability of penalty amounts for an SSI unit.