2016 (5) TMI 995 - AT - Central Excise

Imposition of penalty - Rule 25 (1) (a) and (d) of Central Excise Rules, 2002 - Availed value based SSI exemption under Notification No. 8/2003-CE dated 1/3/2003 - Appellant deposited entire amount of short levy alongwith interest as soon as mistake was pointed out - Held that - there is nothing on record to suggest as to why appellant was under the impression that SSI benefit under Notification No. 8/2003-CE was admissible to them during the financial year 2009-2010. Only the appellant was aware that value of clearances during the financial year 2008 & 2009 have crossed ₹ 4.00 crores and that appellant is not eligible to SSI exemption during 2009-10. By not discharging the appropriate Central Excise duty, the Central Excise Rules have been violated as per the penal provisions contained in Rule 25 (1) (a) & (d) of the Central Excise Rules, 1944. The conduct of the appellant by not resorting to payment of Central Excise duty during the relevant period indicates intent to evade Central Excise duty which could have escaped had it not been detected by departmental officers. Therefore, the provisions contained in Section 11A (2B) of the Central Excise Rules, 1944, applicable at the relevant time were not applicable to the case of the appellant. At the same time it is observed that penalty imposed by the lower authorities is not equivalent to the 100% of the duty sought to be evaded by the appellant. Penalty imposed is roughly 25% of the duty sought to be evaded and is justified. - Decided against the appellant

Summary

Issues:
Whether penalty can be imposed under Rule 25 (1) (a) (d) of the Central Excise Rules, 2002.

Analysis:
The appellant, a manufacturer of paints and varnishes, claimed exemption under Notification No. 8/2003-CE but exceeded the turnover limit for SSI exemption. The appellant cleared products without paying Central Excise Duty, leading to a short levy detected by the Department. The appellant paid the short levy amount upon detection, arguing that no penalty should be imposed under Section 11A (2B) of the Central Excise Act, 1944. The Revenue contended that penalty was justified under Rule 25 (1) (a) (b) of the Central Excise Rules, 2002, due to the intent to evade duty. The appellant's responsibility under the SRP scheme to determine correct duty liability was emphasized.

The adjudicating authority found the appellant in violation of Central Excise Rules for not paying appropriate duty, indicating intent to evade payment. Despite the appellant's argument regarding Section 11A (2B) applicability, the authority noted that the short levy was not due to fraud or willful misstatement. The appellant's awareness of exceeding the turnover limit and still availing exemption was highlighted, showing a violation of Central Excise Rules. The penalty imposed, roughly 25% of the evaded duty, was deemed justified, as it was not equivalent to 100% of the duty evaded. The case law cited by the appellant was deemed inapplicable as it pertained to a different penalty provision under the Central Excise Act, not the Central Excise Rules.

In conclusion, the appeal was dismissed based on the findings that the appellant's conduct indicated an intent to evade duty, justifying the penalty under Rule 25 (1) (a) (d) of the Central Excise Rules, 2002.