2017 (12) TMI 496 - AT - Central Excise

Penalty u/r 15 of CCR 2004 - Held that - penalty is normally imposed to correct a delinquent assessee. It is not compensatory in nature, like interest. It is settled law that penalty is imposed only in case of deliberate defiance of law, like suppression of facts with intention to evade payment of duty - In the present case, it is admitted fact that the appellant had filed ER-1 returns with the Department regularly and had disclosed their affairs, including the tax payable/paid - penalty set aside - appeal dismissed - decided against Revenue.

Summary

Issues:
1. Justification of deleting penalty under rule 15 of CCR 2004 by Commissioner (Appeals).

Analysis:
The appeal by the revenue questioned the deletion of penalty under rule 15 of CCR 2004 by the Commissioner (Appeals). The case involved the observation that the appellant had wrongly utilized credit towards duty payment, resulting in clearance of goods without paying duty, violating Central Excise Rules, 2002 and Cenvat Credit Rules, 2004. A Show Cause Notice was issued, leading to an order imposing a penalty under Rule 15 of Cenvat Credit Rules, 2004. The Commissioner (Appeals) allowed the appeal, emphasizing that the penalty for deliberate defiance of law, like suppression of facts to evade duty payment, was not applicable in this case. The Commissioner (Appeals) highlighted that the appellant regularly filed ER-1 returns, disclosing their affairs and tax payments, which were found to be in order by the adjudicating authority. Therefore, the penalty was deleted based on the lack of intentional evasion of duty.

The revenue contended that the Commissioner (Appeals) did not appreciate a previous tribunal decision regarding the sustainability of demands and the imposition of penalties in similar cases. The revenue sought restoration of the penalty based on the previous tribunal decision. However, the Tribunal found that penalties are imposed to correct delinquent behavior, not as compensation, and are only justified in cases of deliberate defiance of the law, such as suppression of facts to evade duty payment. In this case, the appellant had regularly filed returns and disclosed their tax affairs, with no additional tax demand raised. The Tribunal upheld the decision of the Commissioner (Appeals) in deleting the penalty, as there was no intentional evasion of duty found. Therefore, the appeal filed by the revenue was dismissed, and the penalty deletion was upheld.

In conclusion, the Tribunal upheld the decision of the Commissioner (Appeals) to delete the penalty imposed under rule 15 of CCR 2004, as there was no deliberate defiance of the law or intention to evade duty payment found in the appellant's actions. The case highlighted the importance of regular tax compliance and disclosure of affairs in determining the applicability of penalties in excise duty matters.