2018 (5) TMI 294 - AT - Central Excise

Penalty u/r 25 read with Section 11AC of the Act - short payment of duty as they were not having sufficient balance in their account current as well as in their Cenvat credit account - intent to evade not present - Held that - the appellant had correctly declared the clearances made by them during respective months and their liability of duty in their ER-1 returns, which were filed on time. Due to admitted financial difficulties and labour trouble in their factory, the appellants could not pay the admitted duty liability - in the show cause notice, there is no express allegation of fraud, suppression or mis-declaration or deliberate attempt to evade the duty. In identical situation, where the assessee had declared their clearances and liability of duty clearly, this Tribunal in the case of Saurashtra Cement Ltd 2008 (1) TMI 595 - CESTAT, AHMEDABAD has held that penalty under Rule 25 read with Section 11AC of the Act is not invocable and also held that such contravention would attract penal provisions of Rule 27 of the Central Excise Rules, 2002 which provides for maximum penalty of ₹ 5000/-. Penalty is reduced to ₹ 5000/- for each of the default - confirmation of demand of duty and interest thereon is upheld - appeal allowed in part.

Summary

Issues:
1. Liability of duty and interest on late payment.
2. Imposition of penalty under Rule 25 read with Section 11AC of the Act.

Analysis:

Issue 1: Liability of duty and interest on late payment
The appellants, manufacturers of pesticides and fertilizers, cleared goods in July & August 2010, seeking excise duty payment despite insufficient funds in their accounts. A show cause notice was issued demanding duty of ?9,83,868 along with interest and penalties. The Commissioner (Appeals) confirmed the duty demand, which the appellants did not dispute, having already paid the duty. The Tribunal upheld the confirmation of duty and interest payment, as the appellants admitted their liability, filed timely returns, and had financial difficulties due to labor troubles. The absence of fraud or intent to evade duty led to the decision to uphold the duty and interest payment.

Issue 2: Imposition of penalty under Rule 25 read with Section 11AC of the Act
Regarding the penalty, the Tribunal noted that the appellants correctly declared clearances and duty liability in their returns, without allegations of fraud or suppression. Citing precedents like Saurashtra Cement Ltd case, it was found that penalty under Rule 25 read with Section 11AC was not sustainable without deliberate intent or fraud. The Tribunal reduced the penalty to ?5000 for each default, aligning with Rule 27 of the Central Excise Rules, 2002. The judgment emphasized that penalty for delayed duty payment due to financial crisis should not exceed ?5000, as established by previous Tribunal decisions and upheld by the Gujarat High Court.

In conclusion, the duty and interest payment confirmation was upheld, while the penalty was reduced to ?5000 for each default. The Tribunal's decision was based on the absence of deliberate intent to evade duty and financial difficulties faced by the appellants, in line with legal precedents and statutory provisions.