2013 (10) TMI 144 - HC - Central Excise

Penalty Discharge of Duty Liability - Penalty was imposed on the respondent under Rule 21 of the Central Excise Rules, 2002 on the allegation that respondent failed to discharge duty liability under Rule 8 of the Central Excise Rules, 2002 Held that - It was not disputed between the parties that due penalty along with interest was paid by the respondent before issuance of the show cause notice - The duty short-paid, was paid along with the interest and it was not a case of intend to evade the payment of duty - The Tribunal had further noticed that respondent disclosed its duty liability in the return - The disclosure of duty liability in the return and payment of duty along with interest before the issuance of show cause notices cannot invite penalty under Rule 25 of the Rules in the facts of the present case - Cogent reasons had been given by the Tribunal for deleting the penalty - the order of the Tribunal was legally justified in deleting the penalty and no error had been committed in deleting penalty.

Summary

Issues:
Penalty imposition under Rule 21 of the Central Excise Rules, 2002 for failure to discharge duty liability under Rule 8; Legality of penalty deletion by Tribunal based on duty payment before show cause notice issuance; Interpretation of mens rea requirement for penalty imposition in economic crimes.

Analysis:
The appeal was filed against the penalty imposed on the respondent under Rule 21 of the Central Excise Rules, 2002 for allegedly failing to discharge duty liability under Rule 8. The respondent had deposited the duty along with interest before the show cause notice was issued. The Assistant Commissioner confirmed the demand but imposed a penalty of Rs. 50,000 under Rule 8. The Commissioner (Appeals) upheld the penalty, stating that intent to evade payment of duty was not necessary for penalty imposition.

The respondent appealed to the Tribunal, which allowed the appeal based on a previous ruling stating that penalty under Rule 25 cannot be imposed for a delay in payment of duty under Rule 8. The Tribunal noted that the duty liability was disclosed in the return and set aside the penalty. The appellant argued that the penalty was rightfully imposed due to the short payment of duty.

The High Court examined the case and found that the duty along with interest was paid before the show cause notice, indicating no intent to evade payment. The Tribunal's decision to delete the penalty was legally justified as the duty liability was disclosed and paid before the notice. The Court concluded that no substantial question of law arose, and the appeal was dismissed.

In summary, the High Court upheld the Tribunal's decision to delete the penalty imposed under Rule 8, as the duty was paid before the notice without any intent to evade payment. The ruling emphasized the importance of disclosing duty liability and timely payment in penalty imposition cases related to economic crimes.