2010 (1) TMI 410 - AT - Central Excise

Penalty- The appellants are engaged in the manufacture of electrical goods. A show-cause notice was issued by the department, wherein a penalty was proposed to be imposed under Rule 25 of the Central Excise Rules, 2002, whereas order in original imposing one penalty under Rule 25 of Central Excise Rule, 2002 and another higher penalty without specifying provision therefore. Held that- the original authority imposed a penalty of Rs. 10,000/- under this provision of law. The higher penalty of Rs. 1,22,01 6/- imposed by the said authority was beyond the scope of the show-cause notice. In the result, there will be no penalty on such the appellant. The impugned order is set aside and this appeal is allowed.

Summary

Issues: Penalty imposition under Rule 25 of the Central Excise Rules, 2002; Applicability of multiple penalties under the same provision of law; Scope of penalty imposition beyond the show-cause notice.

Analysis:

1. The appellants, engaged in manufacturing electrical goods, faced a penalty issue due to a consignment damaged in a road accident, repaired with additional inputs, and re-despatched with duty paid only on repair costs. The original authority imposed penalties of Rs. 1,22,016 and Rs. 10,000 under Rule 25 of the Central Excise Rules, 2002. The Commissioner (Appeals) vacated the Rs. 10,000 penalty, leading to the current appeal against the maintained Rs. 1,22,016 penalty.

2. The appellate authority found the imposition of the Rs. 1,22,016 penalty unjustified. The show-cause notice proposed a penalty under Rule 25 without mentioning any other penalties. However, the original authority imposed an additional penalty of Rs. 1,22,016 without specifying the penal provision. The appellate authority mistakenly presumed both penalties under Rule 25, leading to vacating the lower penalty, thereby maintaining the higher one. This misunderstanding led to modifying the adjudication order incorrectly.

3. The imposition of the Rs. 1,22,016 penalty exceeded the scope of the show-cause notice, making it impermissible in law. The appellate authority's decision to maintain this penalty, imposed beyond the notice's scope, was deemed incorrect. Consequently, the appeal was allowed, and the penalty of Rs. 1,22,016 was set aside. Notably, no departmental appeal was made against dropping the Rs. 10,000 penalty, resulting in no penalty being upheld against the appellant.

4. In conclusion, the impugned order was overturned, and the appeal was allowed in favor of the appellant, emphasizing the incorrect imposition of penalties beyond the show-cause notice's scope. The judgment clarified the necessity for penalties to align with the provisions specified in the show-cause notice, ensuring legal adherence and preventing unjust penalties.