2022 (6) TMI 1132 - AT - Central Excise

Levy of penalty u/r 8 (3A) of Central Excise Rules, 2002 - Freezing of Bank accounts of petitioner - non paid duty - HELD THAT - Though the rule clearly prescribes the penalty however, the Revenue has not followed the principle of natural justice in as much as they have not issued any SCN and no opportunity was given to the appellant to defend or explain their case. It is a settled law that even though there is no explicit provision for issuance of SCN, as per the Principle of natural justice an assessee should be given sufficient opportunity to explain their case particularly for invocation of penal provision. In the present case admittedly neither SCN was issued to the appellant nor was any opportunity given. The penalty is liable to be set aside only on the ground of principle of natural justice - Penalty set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
Imposition of penalty under Rule 8(3A) of Central Excise Rules, 2002 without issuance of show cause notice (SCN) and violation of principle of natural justice.

Analysis:
The appellant defaulted in the regular payment of duty, leading to the freezing of the bank account by the department for recovery of the unpaid duty, interest, and penalty as per Rule 8(3A) of Central Excise Rules, 2002. In the appeal, the appellant contested only the imposition of penalty. The appellant argued that no SCN was issued, and there was no malafide intent, attributing the non-payment to a financial crisis. The appellant emphasized that all duties were declared in the invoice and ER-1 return, indicating delayed payment rather than malafide. The appellant contended that recovery without an SCN violated the principle of natural justice. The appellant cited various judgments to support their argument.

The Learned Counsel for the appellant highlighted the department's failure to follow the principle of natural justice by not issuing an SCN. He argued that penal provisions should not be invoked without giving the assessee a chance to explain their case. The Assistant Commissioner for the Revenue reiterated the impugned order's findings, emphasizing the mandatory nature of the penalty under Rule 8(3A) without discretion to reduce or waive it.

Upon careful consideration, the Member (Judicial) observed that the sole issue in the appeal was the imposition of penalty under Rule 8(3A) of the Central Excise Rules, 2002. While the rule mandates the penalty, the Revenue's failure to issue an SCN and provide an opportunity for the appellant to defend their case violated the principle of natural justice. Despite the absence of an explicit requirement for an SCN, the principle of natural justice necessitates providing adequate opportunity for the assessee to explain their position, especially concerning penal provisions. As neither an SCN was issued nor any opportunity granted to the appellant in this case, the penalty was set aside solely on the grounds of violating the principle of natural justice. Consequently, the appeal was allowed with any consequential relief as per the law.

This judgment emphasizes the importance of adhering to the principles of natural justice, particularly in cases involving penal provisions, and highlights the necessity of providing a fair opportunity for the assessee to present their case before imposing penalties.