1993 (11) TMI 148 - AT - Central Excise

Penalty not imposable for bona fide error, negligence or lapses if there is no revenue implication

Summary

Issues:
Appeal against imposition of personal penalty of Rs. 25,000 for availing Modvat credit on differential duty paid by suppliers based on a certificate issued by Range Superintendent, which included gate passes not related to the appellants' unit.

Analysis:
The appeal challenged the imposition of a penalty of Rs. 25,000 on the appellants for availing Modvat credit based on a certificate issued by the Range Superintendent, which included gate passes not related to the appellants' unit. The appellants reversed the credit upon discovering the error, but a show cause notice was issued, leading to the penalty. The advocate for the appellants argued that the error was genuine, arising from the certificate's content and a mistake by the Excise officer. He contended that no double credit was taken, and the penalty would unfairly stigmatize a reputable company. On the other hand, the SDR argued that the appellants were negligent in not verifying all gate passes before availing the credit, making them liable for the penalty to ensure future compliance. The tribunal noted negligence on both sides, with the Range Superintendent and the appellants failing to exercise due diligence. While acknowledging the need for penalties to prevent lapses, the tribunal modified the penalty to a censure, emphasizing the importance of caution for future compliance. The decision aimed to balance accountability with the absence of past losses to revenue, warning of severe consequences for repeated errors.

This judgment highlights the importance of diligence in availing tax credits and the consequences of negligence, even in cases of genuine errors. It underscores the need for both taxpayers and authorities to exercise caution and thorough verification to prevent inadvertent mistakes that could lead to penalties. The tribunal's decision to modify the penalty to a censure serves as a reminder to the appellants to be more vigilant in their future compliance efforts to avoid similar errors and potential penalties.