2011 (10) TMI 529 - AT - Central Excise

Penalty under Rules 9(2), 173Q and 226 of Central Excise Rules, 1944 - Held that - The Appellate Authority mechanically confirmed the adjudication order without looking the reason why a composite penalty of Rs. 1 lakh was imposable under three different Rules. Rule 9(2) operates on its own field in respect of certain offence listed therein. Rule 173Q has its own area of operation. Similarly Rule 226 of Central Excise Rules, 1944 is a distinct rule by the nature of default prescribed therein Different circumstances are prescribed by three different rules for levy of penalty. There is no composite provision apparent by reading of all the three distinct rules which were prevalent at the material time. In absence of any composite prescription of levy of penalty, reason also being absent for invoking the respective rule and whether ingredients of those rules were present not being brought out by the orders of authorities below, it is difficult to approve their action. Cogent evidence in respect of contravention of each such rule is also neither present nor spoken by the order. Therefore, the appellate order can only be said to be cryptic without being reasoned and self speaking. Such order does not stand to reason - Decided in favour of assessee.

Summary

Issues: Composite penalty under multiple Central Excise Rules

Analysis:
The issue in this case revolves around the imposition of a composite penalty of Rs. 1 lakh under Rules 9(2), 173Q, and 226 of the Central Excise Rules, 1944. The appellant argued that since penalties were leviable under three different rules as per the Show Cause Notice (SCN), the authority should have examined the matter properly. The appellant contended that it was aware of the legal provisions and had not failed to fulfill its obligations under the law, thus requesting the waiver of the penalty.

The Appellate Tribunal found that the Appellate Authority had mechanically confirmed the adjudication order without delving into the rationale behind imposing a composite penalty under three distinct rules. It was emphasized that each rule operates in its own field with different circumstances and areas of operation. The Tribunal noted that there was no composite provision for penalty imposition by reading all three rules together. The lack of reasons for invoking each respective rule and the absence of evidence regarding contravention of each rule led the Tribunal to conclude that the appellate order was cryptic, lacking reasoning and clarity. Consequently, the Tribunal decided to reverse the first appellate order and set it aside, allowing the appeal of the appellant.

In summary, the Tribunal's decision focused on the lack of proper examination and reasoning behind the imposition of a composite penalty under multiple Central Excise Rules. The Tribunal emphasized the need for clear evidence of contravention of each rule and reasoned decision-making by the authorities, ultimately leading to the reversal of the first appellate order.