2015 (4) TMI 1240 - AT - Central Excise

Penalty u/r 25 of CER, 2002 - the difference in quantity was presumed by the preventive team and it was held that as the appellant has not reversed the credit attributable to shortages, therefore, it was presumed that the difference in quantity would have been cleared clandestinely - Held that - As per SCN, penalties proposed to be imposed on the basis of assumption and presumptions that appellant would have been issued the duty paid invoices without supplying the goods to unknown buyers is the allegation against the appellant which is only on the basis of assumption and presumption and for imposing penalties under Rule 25 mens rea is required - Penalty set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
Imposition of penalty under Rule 25 of Central Excise Rules, 2002 without alleging mens rea and based on assumption and presumption.

Analysis:
The appellant, a depot receiving goods from various factories and availing Cenvat credit, was found to have discrepancies in the quantity of goods received compared to the quantity mentioned in the invoices. An investigation revealed that the appellant had received quantities more than stated in the invoices and taken excess Cenvat credit. The difference in quantity was presumed to have been cleared clandestinely, leading to a show cause notice proposing penalties under Rule 25 and Rule 27 of the Central Excise Rules, 2002. However, both lower authorities did not impose penalty under Rule 27 but imposed it under Rule 25. The appellant contended that penalty was imposed without alleging mens rea, solely based on assumption and presumption that the excess credit was allowed to someone. The learned Counsel argued that penalty under Rule 25 should not apply in this case.

On the other hand, the department argued that the appellant had not informed about these discrepancies for three years and only declared them in their regular Excise return later. The department contended that if penalty under Rule 25 was not applicable, penalty under Rule 27 should be imposed for contravention of the Central Excise Act/Rules. After hearing both parties, the Tribunal noted that penalties under both Rule 25 and Rule 27 were proposed in the show cause notice, but the lower authorities did not impose penalty under Rule 27. The Tribunal found that the allegations against the appellant were based on assumptions and presumptions, lacking mens rea required for imposing penalties under Rule 25. Therefore, the Tribunal held that penalty under Rule 25 was not imposable and allowed the appeal with consequential relief, if any.