2011 (9) TMI 877 - AT - Central Excise

Waiver of pre-deposit - CENVAT Credit - Penalty under Rule 25 - Whether any penalty was liable to be imposed on the party under Rule 25 - Held that - Prima facie, only one of the clauses (a), (b), (c) and (d) has a nexus with Section 11AC and the same is clause (d) which reads thus contravenes any of the provisions of these rules, or the notifications issued under these rules, with intent to evade payment of duty . Therefore, if a manufacturer, producer, registered person or registered dealer, as the case may be, is found to have contravened any of the Central Excise Rules or any of the Notifications issued under those rules, with intent to evade payment of duty, he will attract a penalty under Rule 25 subject to the provisions of Section 11AC. In my view, this would only mean that, if a penalty has already been imposed on the party under Section 11AC, no further penalty shall be imposed on him under Section 25 on the ground of the contravention mentioned in clause (d) ibid. In the present case, no penalty was even proposed under Section 11AC on the appellant. Rule 25, therefore, would get attracted, unaffected by Section 11AC, in the present case inasmuch as the appellant admittedly committed default of payment of duty and also chose to utilize CENVAT credit for payment of duty on their final product in contravention of Rule 8(3A). Prima facie, therefore, the appellant should make a pre-deposit - Decided against assessee.

Summary

Issues:
1. Applicability of penalty under Rule 25 of Central Excise Rules, 2002.
2. Interpretation of the relationship between Rule 25 and Section 11AC of the Central Excise Act.

Analysis:
1. The appellant sought waiver of pre-deposit and stay of recovery for a penalty imposed on them for defaulting in payment of duty. The appellant defaulted payment for three consecutive months and paid the duty with interest upon receiving a letter from the Central Excise Range Officer. The question was whether a penalty was justified under Rule 25. The adjudicating authority imposed a penalty of Rs. 1,00,000, reduced to Rs. 50,000 by the appellate authority. The appellant argued that any penalty under Rule 25 should be subject to the provisions of Section 11AC of the Central Excise Act, requiring proof of intent to evade duty. However, the Tribunal held that Rule 25 is an independent penal provision with its own factual situations leading to penalties, including the quantum of penalty. The Tribunal clarified that the presence of the phrase "subject to the provisions of Section 11AC" in Rule 25 does not necessitate establishing Section 11AC prerequisites for imposing a penalty under Rule 25. The Tribunal highlighted that only clause (d) of Rule 25, related to contravention with intent to evade duty, has a nexus with Section 11AC.

2. The Tribunal further explained that if a party has already been penalized under Section 11AC, no additional penalty shall be imposed under Rule 25 for contraventions mentioned in clause (d) of Rule 25. In this case, no penalty was proposed under Section 11AC on the appellant. Therefore, Rule 25 applied to the appellant's default in payment of duty and misuse of CENVAT credit, irrespective of Section 11AC. The Tribunal directed the appellant to make a pre-deposit of Rs. 2,000 within four weeks. The appellant was instructed to report compliance by a specified date. The judgment clarified the relationship between Rule 25 and Section 11AC, emphasizing the independent nature of Rule 25's penal provisions and the specific circumstances warranting penalties under it.