2017 (12) TMI 154 - AT - Central Excise

Non-payment of duty within stipulated time - confiscation - redemption fine - penalty - Held that - at the time of filing the ER-1 return for the relevant period, the applicant had sated the reason of non-payment on admitted tax liability within the stipulated time. The ld. Advocate has also produced the acknowledge copy of ER-1 return, indicating such reason before the Bench - further, the appellant had deposited the interest amount for delayed payment of duty. Thus, it is evident that there is no element of suppression, mis-statement, fraud etc, on the part of the appellant No-1 in defrauding the Government Revenue. Applicability of Rule 25 ibid in the identical situation, came up for consideration before the Hon ble Gujarat High Court in the case of Saurashtra Cement Ltd. 2010 (9) TMI 422 - GUJARAT HIGH COURT , wherein upon analysis of the statutory provisions, the Hon ble Court held in the absence of intention to evade payment of duty, the provision of Rule 25 read with Section 11 AC ibid cannot be invoked for imposition of fine and penalty. Confiscation, redemption fine and penalties set aside - appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
Appeal against imposition of redemption fine and penalties under Rule 25(1) of the Central Excise Rules, 2002 read with Section 11 AC of the Central Excise Act, 1944. Appeal against imposition of penalty under Rule 26 ibid.

Analysis:
1. Background: The appeal was filed against an order confirming redemption fine and penalties imposed by the ld. Commissioner (Appeals) under Rule 25(1) of the Central Excise Rules, 2002 read with Section 11 AC of the Central Excise Act, 1944. The case involved the removal of excisable goods without payment of Central Excise duty, leading to a demand of ?10,42,419/-.

2. Appellant's Arguments: The appellant argued that financial crisis prevented timely payment of admitted duty liability. They highlighted communications to the authorities explaining the situation and subsequent deposit of the balance amount. The appellant contended that non-payment was not due to fraud or intent to defraud the government revenue, hence Rule 25 ibid should not apply. The appellant No.2 argued against personal penalty imposition citing legal precedents.

3. Revenue's Position: The Revenue reiterated that the tax liability was not discharged within the stipulated time, leading to violations of Central Excise statutes. They supported the confiscation of goods and imposition of fines and penalties by the authorities.

4. Tribunal's Findings: The Tribunal noted that the appellant had disclosed reasons for non-payment in the ER-1 return and subsequently paid the interest amount for the delayed duty payment. While acknowledging no intent to defraud, the Tribunal emphasized that non-payment within the timeframe attracts penal consequences under Rule 27 ibid. Referring to the Gujarat High Court judgment, the Tribunal held that Rule 25 cannot be invoked without intention to evade duty payment. It highlighted the importance of Section 11AC in determining penalties under Rule 25.

5. Judgment: Considering the legal position and absence of intent to evade duty payment, the Tribunal set aside the order confirming confiscation of goods, imposition of redemption fine, and penalties on the appellants, thereby allowing the appeals in favor of the appellants.

This detailed analysis covers the issues involved in the legal judgment comprehensively, highlighting the arguments presented, legal precedents cited, and the Tribunal's findings leading to the final judgment.