2015 (2) TMI 187 - HC - Central Excise

Imposition of penalty - Whether the Tribunal is correct in holding that the penalty imposed on the assessee under Rule 25 is not sustainable on the ground of violation of Rules 4 and 6 under the facts and circumstances where the manufacturer of excisable goods has removed the goods on payment of only a portion of duty leviable or payable in terms of Rules 4 and 6 of the Central Excise Rules, 2002 - Held that - it is evident that the Tribunal held that on self-assessment, the duty was paid and the goods were removed as required under Rules 4 and 6. The only question that needs to be decided is whether there was justification for invocation of Rule 25. The Tribunal came to hold that when there is no violation of Rules 4 and 6, penalty cannot be imposed under Rule 25. On a reading of Rules 4, 6 and 25, it is clear that once it is found that there is no violation of Rules 4 and 6, penalty cannot be imposed under Rule 25 and, therefore, the finding of the Tribunal on that aspect of the matter has to be sustained. - no reason to differ with the findings as the said decision of the Tribunal is in accordance with the provisions of the said Rules. This Court is of the considered view that a perusal of the grounds of appeal would also reveal that there is no serious error or infirmity in the said finding of the Tribunal - Decided against Revenue.

Summary

Issues:
1. Interpretation of penalty under Rule 25 for violation of Rules 4 and 6 of Central Excise Rules, 2002.

Analysis:
The case involved a dispute regarding the imposition of a penalty on the assessee under Rule 25 of the Central Excise Rules, 2002 for alleged violations of Rules 4 and 6. The assessee, a manufacturer of excisable goods, had supplied goods to a buyer under specific agreements. The Department questioned the valuation of goods supplied to the buyer, alleging related party transactions. After a series of show cause notices, the Commissioner confirmed duty demand, imposed a penalty, and demanded interest. The matter went through a first round of litigation, leading to a remand by the Tribunal for fresh decision by the Commissioner.

In the subsequent appeal, the Tribunal upheld the demand for duty based on valuation under Section 4(1)(b) and Rule 11 of the Central Excise Valuation Rules. However, the Tribunal set aside the penalty imposed under Rule 25, stating that there was no violation of Rules 4 and 6 as the goods were self-assessed and duty was paid as required. The Tribunal emphasized that penalty under Rule 25 cannot be imposed in the absence of violations of Rules 4 and 6. The Tribunal allowed the appeal to the extent of setting aside the penalty.

The Revenue challenged the Tribunal's decision on penalty before the High Court. The High Court, after considering the records and legal provisions, concurred with the Tribunal's findings. The Court held that since there was no violation of Rules 4 and 6, the penalty under Rule 25 was not justified. The Court emphasized that the Tribunal's decision was in accordance with the relevant rules and there were no serious errors in the findings. Therefore, the High Court dismissed the appeal, upholding the Tribunal's decision to set aside the penalty imposed on the assessee.

In conclusion, the High Court's judgment clarified the interpretation of penalty under Rule 25 for violations of Rules 4 and 6 in the context of excise duty assessments. The decision highlighted the importance of compliance with excise rules and the necessity for a clear violation to justify the imposition of penalties.