1990 (4) TMI 162 - AT - Central Excise

Summary

Issues:
Imposition of penalty under Rule 173-Q for failure to observe formalities of Central Excise Rules.

Analysis:
The appeal pertained to M/s. Bengal Chemicals & Pharmaceuticals Limited challenging the penalty imposed by the Collector of Central Excise, Calcutta-1 Collectorate under Rule 173-Q of the Central Excise Rules. The penalty of Rs. 2,000 was imposed for the failure to observe the formalities of Central Excise Rules. The appellant contended that the products penalized, Oral Rehydration Salts, were exempted from duty under certain conditions by Notification No. 130/81. They had supplied these goods to the Government of West Bengal for Community Health Volunteers under the Rural Health Scheme free of cost. Although the relevant documents were initially misplaced, they were later submitted. The Collector found them eligible for exemption but imposed a penalty for non-maintenance of statutory records. The appellant argued that since they were not liable to pay any duty, no penalty should have been imposed, and Rule 173-Q was not applicable, only Rule 226 was involved.

During the hearing, the appellant's counsel reiterated that the goods were eligible for the claimed exemption, and as the Collector had upheld their claim, the penalty was unwarranted. The respondent, represented by the S.D.R., argued that although the goods were eligible for exemption, the appellants failed to maintain statutory records as highlighted in the adjudication order, leading to the imposition of a nominal penalty of Rs. 2,000. The respondent urged the upholding of the Collector's order and the dismissal of the appeal.

The Tribunal carefully considered both parties' arguments and examined the conditions of the notification granting exemption. One condition required the submission of a certificate within ninety days from clearance of the packets, indicating their distribution for specific health programs. The appellants failed to meet this deadline but eventually provided acceptable certificates, leading the Collector to drop the duty demand. However, a penalty was imposed for non-maintenance of statutory records under Rule 173-Q. The Tribunal noted that this rule pertained to the removal of goods in contravention of Central Excise Rules, which was not the case here. The failure to submit certificates on time and non-maintenance of records did not violate any rule. Even the charge of non-maintenance under Rule 226 lost significance due to the goods' proper disposal as per the exemption notification. Consequently, the Tribunal set aside the penalty order, allowing the appeal with consequential reliefs.