2019 (1) TMI 1377 - AT - Central Excise

Penalty u/r 25(1)(d) of the Central Excise Rules, 2002 - failure to export the goods cleared without payment of duty under bond for exportation - no suppression of facts - rule 19 of Central Excise Rules, 2002 - Held that - It is an admitted fact that the goods were cleared after following due procedure in law and were after clearance stored in their godown located in Bhiwandi. From the Bhiwandi godown these goods were to be further transported for exportation from the relevant port. However, certain goods could not have been exported and proof of export in respect of some goods (ARE-1) were not submitted by the appellant within the prescribed time. Export under rule 19 of Central Excise Rules, 2002 is a well documented process. It cannot be the case of the department that the appellant had clandestinely cleared the goods for exportation from their manufacturing unit. These goods have been cleared after following due process and preparation of relevant documents. The export should have been properly accounted for and properly monitored by the Revenue also. In case of delay in submission of proof of export, Revenue itself should have asked for recovery of duty in terms of the bond executed. In case they have failed to monitor the submission of proof of export, the appellant cannot be saddled with the responsibility of suppression of fact. The penalty under Rule 25(1)(d) would be imposable but not equivalent to the amount of duty short paid - Since the provisions of section 11AC are not attracted in the present case, in our view, the ends of justice will be met if the penalty imposed is reduced to ₹ 5,00,000/-. The appeal of the appellant partly allowed to the extent of reduction of penalty to ₹ 5,00,000/-.

Issues Involved:
1. Penalty imposed under Rule 25(1)(d) of the Central Excise Rules, 2002.
2. Non-submission of proof of export within prescribed time limits.
3. Storage of goods in an unapproved warehouse.
4. Alleged suppression of facts and intent to evade duty.
5. Applicability of Section 11AC of the Central Excise Act, 1944.

Issue-wise Detailed Analysis:

1. Penalty Imposed under Rule 25(1)(d) of the Central Excise Rules, 2002:
The adjudicating authority initially imposed a penalty of ?2,63,06,087/- on the appellant, which was reduced by the Commissioner (Appeals) to ?1 Crore. The appellant challenged the reduced penalty, while the Revenue appealed against the reduction, seeking restoration of the original penalty amount.

2. Non-submission of Proof of Export within Prescribed Time Limits:
The appellant cleared goods for export, storing them in a warehouse in Bhiwandi, which was not approved by the Revenue. Proof of export was not submitted within the prescribed time limits for a significant number of ARE-1 forms. The appellant contended that the delay was due to floods that destroyed goods and documents, and they eventually paid the duty along with interest.

3. Storage of Goods in an Unapproved Warehouse:
The goods were stored in a warehouse in Bhiwandi, which was not approved by the Revenue. This was a contravention of the Central Excise Rules, as the warehouse's status was not disclosed to the department. The Assistant Commissioner and Commissioner (Appeals) held that this constituted suppression of facts.

4. Alleged Suppression of Facts and Intent to Evade Duty:
The Assistant Commissioner found that the appellant suppressed the fact of non-exportation of goods, thereby justifying the imposition of a penalty under Rule 25(1)(d). The Commissioner (Appeals) agreed with this finding but reduced the penalty. The appellant argued that there was no intent to evade duty and that all relevant facts were known to the department.

5. Applicability of Section 11AC of the Central Excise Act, 1944:
The appellant argued that Section 11AC, which mandates penalties for fraud, collusion, or willful misstatement, should not apply as there was no intent to evade duty. The Tribunal noted that the penalty under Section 11AC requires the presence of certain conditions, such as intent to evade duty. The Tribunal referred to the Supreme Court's judgments in the cases of Rajasthan Spinning and Weaving Mills and Dharamendra Textile Processors, which clarified that penalties under Section 11AC are not automatic and depend on the presence of specific conditions.

Judgment:
The Tribunal found that the appellant had indeed contravened the provisions of the Central Excise Rules by not submitting proof of export and storing goods in an unapproved warehouse. However, it was noted that the penalty under Section 11AC was not applicable as there was no evidence of intent to evade duty. The Tribunal reduced the penalty to ?5,00,000/-, dismissing the Revenue's appeal and allowing the appellant's appeal to the extent of penalty reduction. The cross objections filed by the appellant were disposed of accordingly.

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