2008 (1) TMI 595 - AT - Central Excise

Penalty - Held that - Admittedly when the goods were removed, no excise duty was required to be paid at that point of time. As such, it cannot be said that the contravention of the nature mentioned in the said clause has been committed by the appellant. Clause (b) is to the effect that the manufacturer does not account for any excisable goods manufactured by him. Admittedly, the said clause does not stand contravened inasmuch as the goods were duly reflected in the statutory records. Similarly, clause (c) is not contravened inasmuch as the appellant has not manufactured goods without applying for registration. Clause (d) refers to contravention of any of the provisions of the rules with intent to evade payment of duty (emphasis provided). Admittedly the excisable goods were entered in records, cleared on Central Excise invoices and duty was also paid subsequently, though belatedly along with interest. As such, the said clause (d) is also not attracted. In such a scenario, the invocation of Rule 25 for imposition of penalty for delayed deposit of duty is not in accordance with the law.

Summary

Issues:
Challenge to penalties imposed for delay in discharging duty liabilities.

Analysis:
The judgment deals with four appeals challenging penalties imposed by the original Adjudicating Authority and upheld by the Commissioner (Appeals) for delays in discharging duty liabilities. The penalties ranged from Rs. 1 lakh to Rs. 75 lakhs. The appellant, engaged in the manufacture of Cement clinker and Cement, failed to pay duties by the 5th of the next month as required by Rule 8 of the Central Excise Rules, 2002, resulting in delays of 25 to 65 days. The appellant argued that the delays were due to financial constraints and delayed payments from customers. They contended that interest already imposed was sufficient penalty and that Rule 25, allowing penalties exceeding Rs. 5000, was not applicable.

The Tribunal noted that Rule 25 of the Central Excise Rules, 2002 allows penalties not exceeding the duty on the excisable goods for contraventions. However, the specific clauses of Rule 25 were not applicable in this case. The appellant did not remove goods without paying duty, did account for manufactured goods, did not manufacture goods without registration, and did not evade duty payment. Therefore, the invocation of Rule 25 for penalties due to delayed duty deposit was deemed inappropriate by the Tribunal.

Furthermore, the Tribunal cited precedents such as M/s. Condor Power Products P. Ltd., M/s. Automotive India (Raipur) Pvt. Ltd., and CCE, Allahabad v. R.K. Cigarettes (P) Ltd., which held that delays due to financial crises do not warrant penalties under Rule 25 but rather fall under Rule 27, which imposes a maximum penalty of Rs. 5000. As a result, the Tribunal reduced the penalties in each case to Rs. 5000, in line with the precedent and legal provisions.

In conclusion, the Tribunal disposed of all appeals by reducing the penalties imposed for delayed duty payments to Rs. 5000 each, based on the interpretation of relevant rules and precedents.