2013 (1) TMI 439 - AT - Central Excise

Non-payment of duty - Penalty under Rule 25 read with Section 11AC Penalty would be attracted under Rule 27 - Assessee manufacture paper and paper board - Rule 8 of Central Excise Rules, 2001/2002 Financial hardship of the assessee for failure to discharge the fortnightly duty liability by the due date - Held that - In this case is simply failure to discharge fortnightly duty liability by due date on two occasions and this non-payment had been disclosed in the RT-12/ER-1 returns. Thus, penalty on the respondent under Rule 25 or Section 11AC would not be attracted. Penalty would be attracted under Rule 27 for each default in discharge of duty liability by the due date. The Commissioner (Appeals) s order totally waiving the penalty is set aside, but instead of restoring the orders of the original adjudicating authority regarding penalty, the penalty of Rs. 5,000/- for each instance of default is imposed on the Respondent under Rule 27 of the Central Excise Rules. Decision against assessee

Summary

Issues Involved:
1. Failure to discharge duty liability within the stipulated time.
2. Imposition of penalty under Rule 25 read with Section 11AC of the Central Excise Act.
3. Applicability of Rule 27 for penalty in case of delayed payment of duty.

Issue-wise Detailed Analysis:

1. Failure to discharge duty liability within the stipulated time:
- The Respondent, a manufacturer of paper and paperboard, failed to discharge duty liabilities for the periods from 16-11-2001 to 30-11-2001 and 16-1-2003 to 31-1-2003. The duty amounts were Rs. 22,86,518/- and Rs. 17,61,484/- respectively.
- The duty for the first period was paid on 3-10-2002, and for the second period, it was recovered on 22-7-2004, both well beyond the stipulated thirty days from the due date.
- The non-payment was detected during the scrutiny of ER-1 returns, and show cause notices were issued, leading to the adjudication by the Additional Commissioner and Joint Commissioner confirming the duty demands along with interest and imposing penalties.

2. Imposition of penalty under Rule 25 read with Section 11AC of the Central Excise Act:
- The Revenue appealed against the Commissioner (Appeals) decision, which set aside the penalties imposed under Rule 25 read with Section 11AC, arguing that the Respondent had collected the duty from customers but failed to remit it to the department.
- The Respondent contended that the failure to pay was due to financial difficulties and that there was no intent to evade duty. They argued that the provisions of Rule 25 and Section 11AC were not applicable as there was no fraud or willful contravention involved.

3. Applicability of Rule 27 for penalty in case of delayed payment of duty:
- The Tribunal noted that during the period of dispute, Rule 8(3) mandated interest on delayed payments, and Rule 8(4) provided for forfeiture of the facility to pay duty in installments if the default continued beyond thirty days or was repeated in a financial year.
- The Tribunal observed that no forfeiture order under Rule 8(4) had been passed by the jurisdictional Assistant/Deputy Commissioner, and hence, the Respondent was not required to pay duty consignment-wise through PLA during the forfeiture period.
- The Tribunal cited the Gujarat High Court judgment in CCE & C v. Saurashtra Cement Ltd., which held that mere delay in payment would attract penalty under Rule 27, not Rule 25 or Section 11AC, as there was no suppression or intent to evade duty.

Conclusion:
- The Tribunal set aside the Commissioner (Appeals) order that waived the penalty entirely but imposed a reduced penalty of Rs. 5,000/- for each default under Rule 27.
- The Tribunal allowed the Department to initiate proceedings under Rule 8(4) if not already done.
- The appeals were disposed of with the modified penalty imposition, emphasizing that penalties under Rule 25 or Section 11AC were not applicable in the absence of fraudulent intent or suppression of facts.