2012 (4) TMI 504 - AT - Central Excise

Quantum of penalty under Rule 25 - Held that - The show cause notice does not specify the nature of breach of law alleged whether was covered by any of the clauses appearing under Rule 25 of Central Excise Rules, 2001. In absence of specific charge for levy of penalty, it is difficult to appreciate the levy itself. When the show cause notice did not provide foundation levelling appropriate charge to impose penalty which is independent of scheme of levy of duty, the assessee has right to know the charge to defend. But no circumstance was provided by the show cause notice to appellant to lead evidence and defend - Without prejudging the matter, in all fairness, it can be said that the appellant should get relief against imposition of penalty only. Insofar as levy of penalty is concerned, the impugned order to that extent is set aside - Decided partly in favour of assessee.

Summary

Issues:
- Imposition of penalty under Rule 25 of Central Excise Rules, 2001 without specific charge
- Lack of opportunity for appellant to defend against penalty
- Directions from Hon'ble High Court regarding penalty imposition and quantum

Analysis:

1. Imposition of Penalty without Specific Charge:
The Tribunal's appellate order did not specifically address the issue of penalty, leading the appellant to approach the Hon'ble Delhi High Court. The High Court directed the Tribunal to determine whether penalty should be imposed and its quantum. The show cause notice did not clearly specify the nature of the alleged breach of law under Rule 25 of Central Excise Rules, 2001, making it difficult for the appellant to defend against the penalty. The absence of a specific charge for the levy of penalty deprived the appellant of the opportunity to know the charge and provide a defense. The Tribunal's decision based on written submissions without addressing the penalty issue adequately was deemed unfair to the appellant.

2. Lack of Opportunity to Defend Against Penalty:
The appellant was not present during the Tribunal hearing, resulting in no pleading raised on the penalty issue. The lack of presence during the initial hearing deprived the appellant of the chance to present evidence and defend against the penalty. However, during the subsequent hearing where both sides were present, the reasons for the penalty imposition were highlighted, allowing a better understanding of the situation. The Tribunal acknowledged that the appellant should have the opportunity to defend against the penalty and that the absence of specific charges in the show cause notice hindered the appellant's ability to provide a proper defense.

3. Directions from Hon'ble High Court:
The Hon'ble High Court's direction to the Tribunal to determine the imposition of penalty and its quantum emphasized the importance of a fair and transparent process in penalty imposition cases. The Tribunal, in light of the High Court's directive, set aside the imposition of penalty and allowed the appeal solely on the issue of penalty. The modification of the Tribunal's order only pertained to the imposition of the penalty, indicating a specific focus on rectifying the procedural shortcomings related to penalty imposition.

In conclusion, the judgment highlighted the significance of providing a fair opportunity for appellants to defend against penalties by ensuring specific charges are levied and addressing penalty issues adequately. The Tribunal's decision to set aside the penalty imposition and allow the appeal on the limited issue of penalty demonstrated a commitment to upholding procedural fairness and transparency in penalty imposition cases.