2013 (9) TMI 343 - AT - Central Excise

Default in Monthly Payment - Penalty under Rule 25 of Central Excise Rules, 2002 - Revenue was of the view that the appellants defaulted in monthly payment of duty in the month of July 2008 to November 2008 beyond 30 days and cleared the goods by utilizing the CENVAT credit and without payment of duty exclusively from the account current during the default period as contravention of provisions of Rule 8(3A) of Central Excise Rules, 2002 - Held that - Penalty of Rs. 5 lakhs vis- -vis duty involved of Rs. 8.25 lakhs was harsh and reduction was warranted - It would not be fair to impose penalty to the extent of 60% of duty when the omission was limited to default of payment of duty and the same had been discharged with interest - In fact, CENVAT account had been debited and therefore it cannot be said that there was removal without payment of duty - Relying upon CCE, Meerut v. Kitply Industries Ltd. 2010 (2) TMI 221 - ALLAHABAD HIGH COURT - Penalty under Section 11AC was not imposable in cases where default had occurred because of bona fide mistaken belief - It was only a deemed removal without payment of duty - Penalty of Rs. 50,000 under Rule 25 would meet the ends of justice in the case - while rejecting the appeal otherwise penalty was reduced. Rule 8(3A) provided that in the case of default beyond 30 days, the facilities of monthly payment of duty and utilization of CENVAT Credit during the period of default was withdrawn without any necessity of any specific order in this regard by the Assistant Commissioner or the Dy. Commissioner - It had become the responsibility of the assessee to pay duty consignment-wise from account current and clear the goods - In the event of failure, the goods were to be deemed to have been cleared without payment of duty and the consequences and penalties as provided in the Central Excise Rules were to follow Decided partly in favour of Assessee.

Summary

Issues:
Default in monthly payment of duty, contravention of Rule 8(3A) of Central Excise Rules, demand of duty, imposition of penalty under Rule 25, applicability of penalty under Section 11AC, withdrawal of monthly payment facility, amendment of Rule 8(3A) of Rules, imposition of penalty under Rule 27, reduction of penalty amount.

Analysis:
The judgment deals with a case where the appellants defaulted in monthly payment of duty beyond 30 days, utilizing CENVAT credit and clearing goods without payment of duty, leading to proceedings under Rule 8(3A) of Central Excise Rules. A demand of duty amounting to Rs. 8,24,877/- was confirmed, along with a penalty of Rs. 5 lakhs under Rule 25. The appellant argued against the penalty under Section 11AC, citing precedents and emphasizing the absence of intention to evade duty, but the JDR reiterated the reasoning of the impugned order.

The Tribunal examined the provisions of Rule 8(3) and Rule 8(3A) of the Central Excise Rules. Rule 8(3A), introduced in 2005, mandated forfeiture of the monthly payment facility for default beyond 30 days, requiring duty payment consignment-wise without utilizing CENVAT credit until the outstanding amount was paid. Subsequently, an amendment in 2006 withdrew the monthly payment facility without the need for a specific order, shifting the responsibility to the assessee to pay duty at the time of removal.

The Tribunal distinguished the cited precedents from the current case, emphasizing the applicability of penalty under Rule 25 due to contravention of Rule 8(3A). It noted several decisions supporting the imposition of Rule 25 penalty in similar cases. The Tribunal also considered the reduction of penalty amount, acknowledging the appellant's payment with interest and deeming removal without payment of duty, leading to a reduction of the penalty from Rs. 5 lakhs to Rs. 50,000 under Rule 25 to align with the principles of justice.

In conclusion, the Tribunal upheld the demand of duty and imposition of penalty under Rule 25, rejecting the appeal on other grounds but reducing the penalty amount to Rs. 50,000 to achieve a fair outcome. The judgment provides a detailed analysis of the legal provisions, precedents, and circumstances surrounding the default in duty payment, ensuring a just and reasoned decision in the matter.