2017 (12) TMI 1187 - AT - Central Excise

Penalty u/s 11AC of CEA and u/r 26 of CER - mismatching of figures in ER-1 and ER-4 - Held that - if provisions of Section 11AC of the Act are there then there is no discretion to waive the penalty against the assessee - Admittedly, in this case, Revenue has failed to brought on record the evidence that the appellants did not pay the duty due to fraud, collusion, willful mis-statement etc. As provision of Section 11AC of the Act are missing, therefore, no penalty is imposable on the appellant - Further, under rule 26 of Central Excise Rules, 2002 penalty on co-appellant is imposable subject to the provision of Section 11AC of the Act. Admittedly, the provision of Section 11AC of the Act are missing, therefore, penalty on the co-appellant is also not warranted. Penalties set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
Penalties under Section 11AC of the Central Excise Act and Rule 26 of the Central Excise Rules, 2002 imposed on appellants for mismatching figures in ER-1 and ER-4 returns.

Analysis:
The appellants contested penalties imposed on them under Section 11AC of the Central Excise Act and Rule 26 of the Central Excise Rules, 2002. The case involved the manufacturing of Aerated Water where discrepancies were found between the figures reported in ER-1 and ER-4 returns. The appellants attributed the mismatch to breakages of finished goods and reversed the CENVAT Credit accordingly. Although they paid the duty along with interest to resolve the discrepancies, penalties were still imposed. The main issue was whether penalties were justifiable given the circumstances.

The appellants argued that the discrepancies were not intentional and were due to breakages, indicating no mala fide intention to evade duty. On the contrary, the Revenue contended that mandatory penalties were warranted under Section 11AC of the Act due to the detected mismatch in figures. They relied on legal precedents such as the case of Union of India Vs. Dharmendra Textile Processors and Sushil Sharma Vs. CESTAT to support their position.

After hearing both parties, the tribunal analyzed the legal provisions and precedents cited. Referring to the decision of the Hon'ble Apex Court in the case of Dharmendra Textile Processors, it was noted that if Section 11AC provisions are invoked, the authority lacks discretion to waive penalties. However, as the Revenue failed to provide evidence of fraud or willful misstatement by the appellants, the tribunal concluded that penalties were not justified. Additionally, since Section 11AC provisions were not met, the penalty on the co-appellant under Rule 26 of the Central Excise Rules was also deemed unwarranted.

Consequently, the tribunal held that penalties on both appellants were not imposable and set aside the impugned order, ultimately allowing both appeals in favor of the appellants.