2013 (3) TMI 386 - AT - Central Excise

Delay in payment of excise duty - duty for March 2010 required to be paid by 31-3-2010 was finally paid on 18-5-2010 - assessee contested against penalty levy on non-mention of the specific clause of Rule 25(1) - Held that - As during the forfeiture period the appellant did not pay the duty consignment wise and only through PLA, clearances would be treated having been made without payment of duty and hence the provisions Rule 25(1) would be attracted which provides for imposition of penalty for clearances of the goods in contravention of the provisions of the Rules. The judgment of Hon ble Gujarat High Court cited by the Appellant does not discuss the implication of the wordings of Rule 8(3A). As regards non-mention of the specific clause of Rule 25, on going through the show cause notice it is found that nature of contravention has been specifically mentioned. Therefore, non-mention of exact clause of sub-rule (1) of Rule 25 in the show cause notice would not vitiate the same. Therefore penalty has been correctly imposed under Rule 25. Taking into account the fact that default attracting the provisions of Rule 8(3A) was only for 17 days, the duty involved on the goods cleared during this period which was required to be paid consignment-wise, is only Rs. 1,07,067/- and this duty had been paid next month, penalty of Rs. 25,000/- for the clearances of the goods deemed to have been cleared without payment of duty is on much higher side, thus while imposition of penalty on the appellant under Rule 25(1) is upheld, the quantum of penalty is reduced to Rs. 5000/-.

Summary

Issues:
1. Default in payment of central excise duty for the month of March 2010.
2. Interpretation of Rule 8(3A) of the Central Excise Rules, 2002.
3. Imposition of penalty under Rule 25(1) of Central Excise Rules, 2002.
4. Reduction of penalty by the Commissioner (Appeals).

Analysis:
1. The appellant defaulted in paying central excise duty for March 2010, which was required to be paid by 31-3-2010 but was paid on 18-5-2010 along with interest. The Department invoked Rule 8(3A) due to the delay in payment, leading to a show cause notice for duty demand and penalty imposition.

2. Rule 8(3A) mandates that if duty is not paid within 30 days from the due date, the assessee must pay duty consignment wise without utilizing Cenvat credit till the outstanding amount is paid. Failure to comply deems goods as cleared without duty payment, attracting penalties. The legal fiction under this rule aims to ensure timely duty payment.

3. The appellant argued against the penalty imposition under Rule 25(1), citing the necessity to specify the exact clause of the rule in the show cause notice. However, the Tribunal upheld the penalty, emphasizing the need for strict adherence to Rule 8(3A) to maintain tax discipline.

4. The Commissioner (Appeals) reduced the penalty from Rs. 1,07,067/- to Rs. 25,000/-. The Tribunal acknowledged the reduction but further lowered the penalty to Rs. 5,000/-, considering the short default period of 17 days and the duty amount involved. The penalty amount should align with the default duration and duty quantum.

In conclusion, while the penalty under Rule 25(1) was upheld, the Tribunal reduced it to Rs. 5,000/- to align with the circumstances of the case. The judgment highlights the importance of adhering to excise duty payment timelines and the legal consequences of default as outlined in Rule 8(3A) of the Central Excise Rules, 2002.