2012 (4) TMI 182 - HC - Central Excise

Waiver of penalty imposed under Rule 173Q of the Central Excise Rules, 1944 assessee opted not to avail the benefit of the notification No.9/99/C.Ex. Dated 29.09.99 in the middle of the year Revenue contended violating conditions of said notification Held that - Tribunal was justified in deleting the penalty firstly, since assessee opted not to avail the benefit of the notification after obtaining permission from the excise authorities hence no violation of conditions. Secondly, there was no intention of evading tax, in fact assessee cleared the goods on full payment of duty. Thirdly, during the period from 3.3.2000 to 24.2.2001, though the assessee has cleared the goods by availing concessional duty under said notification, differential duty has not been demanded from the assessee Decided against the Revenue.

Summary

Issues:
1. Interpretation of Notification No.9/99/C.Ex. dated 29th September 1999 regarding diversion from mandatory provisions mid-year.
2. Imposition of penalty under Rule 173Q(1) of the Central Excise Rules, 1944 for contravention of provisions despite no duty being demanded.
3. Determination of duty dropped when no duty is demanded in the show cause notice.

Analysis:
1. The case involved the assessee clearing excisable goods at concessional duty under Notification No.9 of 1999 but later choosing not to avail the concessional rate mid-year, which led to penalty proceedings. The Adjudicating authority imposed a penalty under Rule 173Q(1) of the Central Excise Rules, 1944, which was upheld by the Commissioner of Central Excise (Appeals) but later deleted by CESTAT based on a precedent. The Revenue challenged this deletion.

2. The Revenue contended that the assessee's decision to not avail the notification benefit before the financial year's end violated the notification's condition, justifying penalty under Rule 173Q. However, the court disagreed, stating that the assessee had obtained permission from excise authorities to opt out, eliminating any violation. Moreover, the penalty can be imposed for contravention with intent to evade duty, which was not the case here as the goods were cleared with full payment. Additionally, no differential duty was demanded from the assessee for the period in question.

3. The Tribunal's decision to delete the penalty was upheld by the High Court, emphasizing that the penalty was rightly removed despite the assessee's choice not to avail the notification benefit before the financial year's end. The court found no fault in the Tribunal's decision, ultimately ruling in favor of the assessee and disposing of the appeal without costs.