2017 (12) TMI 897 - AT - Central Excise

Penalty - whether Rule 25 ibid read with Section 11AC ibid can be invoked in the circumstances of the present case for imposition of penalties against the appellants? Held that - In this case, though the finished goods, at times, were removed by means of cycle rickshaws, auto rickshaws etc., but the invoices were issued at the end of the day, by furnishing the quantity and duty with regard to the goods actually removed from the factory - The only lacunae in this case was that the vehicle number in invoice was wrongly mentioned. The reason for issuance of a consolidated invoice on the end of the day was to avoid issuing several invoices in respect of each small quantity of the goods. The modus operandi adopted by the appellant cannot be termed as fraudulent in nature, with intention to defraud the government revenue - in absence of any suppression, fraud, collusion etc., with intention to evade payment of Central Excise duty, penalties cannot be imposed on the appellant. Under the identical situation and circumstances of the case, the Gujarat High Court in the case of CCE & C Vs. Saurashtra Cement Ltd. 2010 (9) TMI 422 - GUJARAT HIGH COURT has set aside the penalty imposed on the appellant. Penalty set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Applicability of Rule 25 read with Section 11AC for imposition of penalties.

Analysis:
The case involved appeals against an order passed by the Commissioner of Central Excise & Customs, New Delhi. The appellants, M/s Trusine Electronics Pvt. Ltd. and its Director, challenged the imposition of penalties in the absence of any duty demand. On the other hand, M/s Bansal Insulation Products Pvt. Ltd., Shree Metal Industries, and others contended that they did not violate any provisions of the Central Excise Act and Rules, hence penalty imposition was unjustified. The central issue before the Tribunal was whether Rule 25 read with Section 11AC could be invoked for penalties against the appellants.

The facts revealed that M/s Trusine Electronics Pvt. Ltd. procured inputs for manufacturing transformers from M/s Bansal Insulation Products Pvt. Ltd. and Shree Metal Industries, availing Cenvat credit on duty paid by the input manufacturers. The dispute arose when the Central Excise department denied Cenvat benefit due to discrepancies in the transport of goods and invoice details. The impugned order dropped the duty demand but confirmed penalties. The Tribunal, after hearing both sides, analyzed the situation.

It was found that there was no dispute regarding the duty paid character of the inputs or their utilization for further manufacturing. Although goods were sometimes transported via unconventional means, the invoices accurately reflected the goods removed from the factory. The Tribunal noted that the appellant's actions were not fraudulent, with no intention to evade duty payment. Citing a similar case from the Gujarat High Court, the Tribunal emphasized that penalties cannot be imposed without evidence of suppression, fraud, or collusion to evade duty payment.

The Tribunal referred to legal precedents to explain the significance of the term "subject to" in Rule 25 and Section 11AC, highlighting that penalties are not automatic and must be justified by intentional evasion. Ultimately, the Tribunal found no merit in the imposition of penalties against the appellants and allowed the appeals in their favor, setting aside the penalties. The judgment emphasized the importance of evidence of fraudulent intent for penalty imposition under the Central Excise Act and Rules.

In conclusion, the Tribunal's analysis focused on the lack of fraudulent intent or evasion of duty by the appellants, leading to the dismissal of penalties imposed by the impugned order. The judgment underscored the necessity of concrete evidence of suppression or collusion to justify penalty imposition under the relevant legal provisions.