2018 (10) TMI 1323 - AT - Central Excise

Penalty u/r 173 Q(1)(a) of Central Excise Rules, 1944 - demand of excise duty was set aside - Held that - Since the penalty is in connection with the demand of Excise duty and same was set aside, the penalty should not be sustained. This issue has been dealt by Larger Bench of this Tribunal in the case of Godrej Soaps Vs. Commissioner of Central Excise Mumbai 2004 (10) TMI 112 - CESTAT, MUMBAI , wherein Larger Bench held that when demand gets dropped on any account penalty provision cannot survive against the assessee under Rules, 173 Q(1)(a) of Central Excise Rules, 1944. Penalty imposed under 173 Q(1)(a) is not sustainable - appeal dismissed - decided against Revenue.

Summary

Issues:
- Revenue appeal seeking to uphold demand confirmed by original authority
- Appellant's appeal for waiver of penalty under Rule 173 Q(1)(a) of Central Excise Rules, 1944

Analysis:
1. The judgment by the Appellate Tribunal CESTAT Ahmedabad involved two main issues: the Revenue's appeal to uphold a demand confirmed by the original authority and the appellant's appeal for the waiver of a penalty imposed under Rule 173 Q(1)(a) of the Central Excise Rules, 1944. The Revenue's appeal was dismissed as the amount involved was less than ?20 lakhs, making it not maintainable based on the Government's litigation policy as per Circular No.390/Misc/116/2017-JC dated 11.07.2018. On the other hand, the appellant's appeal was related to a penalty proposed for contravention of Rule 52A of the Central Excise Rules, 1944. The adjudication order confirmed a demand of ?18,30,039, which was later set aside by the Commissioner (Appeals). The Tribunal referred to a precedent set by the Larger Bench in the case of Godrej Soaps Vs. Commissioner of Central Excise Mumbai -2004 (174) ELT. 25 (Tri. LB), where it was held that when a demand is dropped, the penalty provision cannot be sustained against the assessee under Rule 173 Q(1)(a) of the Central Excise Rules, 1944.

2. The Tribunal, in line with the Larger Bench decision, concluded that the penalty imposed under Rule 173 Q(1)(a) was not sustainable. Consequently, the Revenue's appeal was set aside, and the appellant's appeal was allowed. The judgment highlighted the principle that if a demand is dropped, the penalty provision cannot be upheld against the assessee. This case serves as a significant precedent for similar situations where demands are contested, and penalties are imposed, emphasizing the need for consistency in applying such legal principles to maintain fairness and justice in tax matters.