2015 (6) TMI 1218 - AT - Central Excise

Penalty u/r 27 of CER - non-renewal of letter of undertaking - allegation that the requirements under Notification No. 42/2001-C.E.(N.T.) dated 26.06.2001 not complied with - scope of SCN - HELD THAT - Undisputedly the Notification No. 42/2001-CE(NT) dated 26.06.2001 does not state that the LUT has to be renewed every twelve months. The notification says that the manufacturer-exporter may furnish a letter of undertaking in the form specified in Annexure II in lieu of a bond . In para 3.4 of Chapter 7 of CBEC s Central Excise Manual of Supplementary Instructions, 2005 it is seen stated that the Letter of undertaking shall be valid only for a period of twelve months . Needless to say that instructions are issued by the Board to bring uniformity in administration of law. The appellant here in has submitted the triplicate and quadruplicate copies of the relevant ARE-I. In such circumstances when proof of export is on record the failure if any, to comply with such instruction which is not in accordance with the Notification No. 42/2001-CE(NT) dated 26.06.2001 cannot be held to be procedural lapse. The purpose sought to be achieved by such instruction is to establish the genuineness of export of goods. When the proof of export is on record otherwise, to give undue reliance upon the instruction is not called for. The imposition of penalty is otherwise also unwarranted for the reason that the show cause notice does not mention of levy of penalty under Rule 27 of Central Excise Rules, 2002 - Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Imposition of penalty under Rule 27 of the Central Excise Rules 2002 for failure to renew the letter of undertaking (LUT) after export of goods.

Analysis:
The case involved a dispute regarding the imposition of a penalty of Rs. 5,000 under Rule 27 of the Central Excise Rules 2002 on the appellant for not renewing the LUT after exporting goods. The Commissioner (Appeals) set aside the duty demand and penalty imposed under section 11AC of the Central Excise Act, 1944 but upheld the penalty under Rule 27 due to the procedural lapse of not renewing the LUT after 12 months. The appellant challenged this penalty, arguing that there was no legal requirement to renew the LUT periodically as per the relevant notifications. The appellant also contended that the show cause notice did not mention the penalty under Rule 27, making its imposition illegal.

The Tribunal analyzed the provisions of Notification No. 42/2001-CE(NT) dated 26.06.2001 and Chapter 7 of CBEC's Central Excise Manual of Supplementary Instructions, 2005. It noted that while the manual stated the LUT validity for 12 months, the notification did not mandate periodic renewal. The Tribunal emphasized that instructions or circulars cannot alter statutory provisions and that the purpose of the LUT was to establish the genuineness of exports, which was evident from the export proof submitted by the appellant. Therefore, the failure to comply with the manual's instruction, not aligned with the notification, did not constitute a procedural lapse.

Moreover, the Tribunal highlighted that the show cause notice did not mention the penalty under Rule 27, making its imposition illegal. The appellant's counsel also referenced a previous Tribunal decision in the appellant's favor on the same issue. Considering these factors, the Tribunal concluded that the penalty of Rs. 5,000 under Rule 27 was unsustainable and set it aside, allowing the appeal in favor of the appellant.

In summary, the Tribunal ruled that the penalty under Rule 27 for not renewing the LUT after export was unjustified as there was no legal requirement for periodic renewal, and the show cause notice did not include this penalty. The Tribunal emphasized the need for alignment between statutory provisions and supplementary instructions, ultimately setting aside the penalty imposed by the Commissioner (Appeals).