2016 (5) TMI 1199 - AT - Central Excise

Imposition of penalty - Rule 25 of the Central Excise Rules, 2002 and Rule 15(1) of CENVAT Credit Rules, 2004 for non-compliance of Rule 8,12 of Central Excise Rules, 2002 - Held that - with regard to imposition of penalty under Rule 25 of Central Excise Rules, 2002 it is found that the Appellant has paid the tax along with interest even before the issuance of show cause notice and that there has been delay only in payment of duty by the Appellant and not default in payment of duty as alleged. The Appellant have admitted their duty liability in the ER-1 returns but have not paid the duty due to late receipt of money from their customers which have not been disputed by the revenue. Therefore, by applying the decision of Gujarat High Court in the case of Commissioner of Central Excise & Customs vs. Saurashtra Cements Ltd. 2010 (9) TMI 422 - GUJARAT HIGH COURT which was affirmed by Hon ble Supreme Court reported in 2014 (1) TMI 264 - SUPREME COURT OF INDIA , the penalty imposed under Rule 25 ibid is set aside. With regard to imposition of penalty under Rule 15(1) of CENVAT Credit Rules, 2004, it is found that the same has arisen out of the fact that the Appellant had violated Rule 8(3A) of Central Excise Rules, 2002 as regards payment of duty. I find that the law is settled as regards demand of duty/credit restriction on account of Rule 8(3A) of Central Excise Rules, 2002. Since Rule 8(3A) of Central Excise Rules, 2002 has been held constitutionally invalid; I find no other reason as to why CENVAT Credit should not be used for payment of duty. Hence the penalty levied under Rule 15(1) of CENVAT Credit Rules, 2004 is also liable to be set aside. - Decided in favour of appellant with consequential relief

Issues:
1. Discrepancy in payment of excise duty noticed during scrutiny in ACES.
2. Intimation to pay duty consignment-wise without utilizing CENVAT Credit.
3. Show Cause Notice issued for non-compliance of rules and imposition of penalties.
4. Appeal against penalties imposed under Central Excise Rules and CENVAT Credit Rules.
5. Interpretation of Rule 25 of Central Excise Rules and Rule 15(1) of CENVAT Credit Rules for penalty imposition.

Analysis:
1. The Appellant, engaged in Kraft Paper manufacturing, faced scrutiny revealing excise duty payment discrepancies. Department notified duty payment method and non-utilization of CENVAT Credit through oral and written communication.
2. Show Cause Notice (SCN) issued citing non-compliance with rules and proposing penalties under various Central Excise and CENVAT Credit Rules.
3. Appellant responded to SCN citing inability to file returns due to damaged records and ceased operations. Original adjudicating authority confirmed penalties, leading to an appeal.
4. Commissioner (Appeals) modified penalties but upheld some. Appellant appealed against this decision.
5. Arguments presented in appeal highlighted incorrectness of SCN, citing payment prior to notice issuance and invalidity of Rule 8(3A) of Central Excise Rules. Reference to relevant case laws supported the appeal.
6. Respondent reiterated findings, opposing penalty waiver for the Appellant.
7. The main issue was whether penalties under Rule 25 of Central Excise Rules and Rule 15 of CENVAT Credit Rules should be imposed.
8. Penalty under Rule 25 set aside due to timely tax payment and financial constraints, referencing relevant case laws.
9. Penalty under Rule 15(1) of CENVAT Credit Rules annulled as Rule 8(3A) was deemed unconstitutional, allowing CENVAT Credit for duty payment.
10. The appeal was allowed, setting aside both penalties with consequential relief for the Appellant.

← Previous Next →