2018 (9) TMI 555 - AT - Central Excise

Waiver of penalty - Rule 173Q, of the Central Excise Rules, 1944 - no proposal for confiscation of the goods is made - case of appellant is that as the goods were not liable for confiscation, in that circumstances, no penalty is impossable under Rule 173Q of Central Excise Rules, 1944 - Held that - To impose penalty under Rule 173Q of the erstwhile Central Excise Rules, 1944, the goods are required to be held liable for confiscation. Admittedly, in the case, the goods were not held liable for confiscation - in the light of the decision of this Tribunal in the case of Shri Mahavir Wire Industries Vs. Commissioner of C. Ex., Indore 2015 (10) TMI 2549 - CESTAT NEW DELHI , the penalty is not impossible under Rule 173Q, of erstwhile rules, therefore, the penalty imposed on the appellant is set aside. Appeal allowed - decided in favor of appellant.

Summary

Issues: Penalty under Rule 173Q of Central Excise Rules, 1944

Analysis:
The appellant appealed against an order seeking to drop the penalty imposed on them. The case involved the manufacturing of nylon filament yarn and nylon chips, with duty exemption on the former but duty liability on the latter used for manufacturing the exempted goods. A show cause notice was issued demanding duty on nylon chips, along with interest and proposing a penalty under Rule 173Q of the Central Excise Rules, 1944. The initial order confirmed duty demand, interest, and imposed a penalty of ?40,000. The matter was remanded back to the adjudicating authority by the Tribunal for de novo adjudication. In the subsequent proceedings, duty demand and interest were confirmed, and a penalty equivalent to duty was imposed. The Appeal Commission reduced the penalty to ?40,000. The appellant then approached the Tribunal challenging the penalty.

The appellant's counsel argued that as the show cause notice did not propose confiscation of goods, no penalty under Rule 173Q could be imposed since the rule applies only if goods are liable for confiscation. As the goods were not liable for confiscation, the penalty on the appellant should be set aside. On the contrary, the Assistant Commissioner reiterated the findings of the impugned order. After hearing both parties and considering the submissions, the Tribunal held that to impose a penalty under Rule 173Q of the Central Excise Rules, 1944, the goods must be liable for confiscation. Since in this case, the goods were not liable for confiscation, relying on a previous decision, the Tribunal set aside the penalty imposed on the appellant.

Therefore, the Tribunal disposed of the appeal by setting aside the penalty under Rule 173Q of the Central Excise Rules, 1944, based on the goods not being liable for confiscation as per legal precedent.