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2013 (4) TMI 382 - AT - Central ExciseNon discharge of the duty liability for the month of December 2007 to February 2008 - default as per Rule 8(3A) of the Central Excise Rules, 2002 - contested by appellant No.1 that penalty under Rule 25 of the Central Excise Rules not to be imposed - Held that - The appellant has paid the entire defaulted amount in cash along with interest. Therefore no penalty can be imposed upon the appellant No.1 under Rule 25 of the Central Excise Rules, 2002. The only penalty which could have been invoked is under Rule 27 of the Central Excise Rules because appellant No.1 has contravened the provisions of Central Excise Rules for making the payments from cenvat credit when they were required to make the payments in cash for each consignment. It is seen from the show cause notice dated 25.11.10 that no penalty under Rule 27 of the Central Excise Rules has been proposed against appellant No.1. Accordingly, the penalties that Rs.9,96,740/- imposed against appellant No.1 is required to be set aside. So far as imposition of penalties upon appellant No.2 and 3 are concerned, it is seen that the goods were cleared on payment of duty but instead of making the payment in cash the payments were made from cenvat credit. Therefore the goods were cleared on payment of duty and the same was duly reflected in the returns filed by the appellant No.1. Thus it cannot be held that there was any malafide intention on the part of appellant No.2 and 3 to evade payment of duty. The only default in this case was utilising cenvat credit and there is an interest loss to the Revenue from the date of utilisation of cenvat credit till the demand of duty in cash which has been made good by making the payments in cash - all the three appeals filed by the appellants are allowed.
Issues involved:
Appeal against duty liability default for the period December 2007 to February 2008, imposition of penalties under Rule 25 and Rule 26 of the Central Excise Rules, 2002, payment through cenvat credit, applicability of case laws on penalty imposition. Analysis: Issue 1: Duty Liability Default The appeals were filed against the duty liability default by appellant No.1 for the period December 2007 to February 2008. The original order confirmed a demand of Rs.9,96,740/- against appellant No.1, along with interest under Section 11AB of the Central Excise Act, 1944. Penalties were also imposed on appellant No.1, appellant No.2, and appellant No.3. The Commissioner (Appeals) upheld the order, leading to the appeals before the tribunal. Issue 2: Penalty Imposition under Rule 25 Appellant No.1 contested the penalty imposition under Rule 25 of the Central Excise Rules, relying on a judgment by CESTAT Ahmedabad bench in the case of Tejpal Paper Mills Ltd. The tribunal observed that when the default is rectified by the assessee by making payment in cash, no penalty under Rule 25 can be imposed. As appellant No.1 paid the defaulted amount in cash along with interest, the tribunal held that no penalty under Rule 25 could be imposed. Issue 3: Penalty Imposition under Rule 26 Regarding penalties on appellant No.2 and appellant No.3 under Rule 26 of the Central Excise Rules, the tribunal considered the argument that no penalties were imposable based on various judgments. The tribunal noted that the goods were cleared on payment of duty, albeit through cenvat credit instead of cash. As there was no malafide intention to evade payment of duty, penalties under Rule 26 were deemed not applicable. The tribunal highlighted that the only default was the utilization of cenvat credit, which was rectified by making payments in cash, thereby setting aside the penalties imposed on appellant No.2 and appellant No.3. Conclusion: Based on the observations and legal analysis, the tribunal allowed all three appeals filed by the appellants, setting aside the penalties imposed on them. The judgment emphasized the importance of rectifying defaults by making payments in cash to avoid penalties under the Central Excise Rules.
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