2009 (7) TMI 1013 - AT - Central Excise

Summary

Issues:
- Interpretation of exemption notification No. 8/2003 for duty exemption
- Imposition of penalty under Rule 25 of CER, 2002
- Application of mens rea in penalty imposition
- Reduction of penalty by Commissioner (Appeals)
- Appeals filed by both assessee and Revenue

Interpretation of Exemption Notification:
The case involved the appellants engaged in manufacturing goods falling under Chapter Heading 48 of CETA, 1985, which initially attracted Nil rate of duty but later 8% ad valorem duty. The appellants continued to avail exemption under notification No. 8/2003 despite exceeding the Rs. 4 crores clearance value limit. The jurisdictional Central Excise Superintendent informed them they were not entitled to the exemption, leading to demands for duty payment.

Imposition of Penalty under Rule 25:
The Assistant Commissioner confirmed duty demands and imposed penalties under Rule 25 of CER, 2002, read with Section 11AC of CEA, 1944. The appellants challenged the penalties on the grounds of misinterpretation of the exemption notification without any intention to evade duty. The Commissioner (Appeals) reduced the penalties considering the absence of mala fide intent but upheld the duty liability and interest payments.

Application of Mens Rea in Penalty Imposition:
The Commissioner (Appeals) acknowledged no suppression by the appellants to evade duty but cited a Tribunal decision that mens rea is not essential for penalty imposition under Rule 25. Despite the absence of intent to evade duty, penalties were reduced based on the circumstances of the case.

Reduction of Penalty by Commissioner (Appeals):
The Commissioner (Appeals) reduced penalties imposed under Rule 25 from Rs. 57,945 to Rs. 15,000 and from Rs. 4,31,419 to Rs. 1 lakh, considering the absence of intention to evade duty and the payment of duty and interest before the show cause notices were issued. The appellants appealed for further reduction, while the Revenue sought an increase in penalties.

Appeals Filed by Both Assessee and Revenue:
The Tribunal upheld the duty liability and interest payments by the appellants but rejected their appeals for further reduction in penalties. The Revenue's appeals for a 100% penalty enhancement were also dismissed, concluding that the provisions of Section 11AC were not applicable due to the absence of mens rea on the part of the assessee.

In summary, all four appeals - two by the assessee and two by the Revenue - were rejected, and the Commissioner (Appeals)'s order was upheld, with the Tribunal's decision pronounced on 17-7-2009.