2018 (6) TMI 775 - AT - Central Excise

Penalty u/r 25 of CER - storage of goods outside factory premises - permission not obtained under Rule 4(4) of the Central Excise Rules 2002 - Held that - The imposition of penalty on the sole ground of non-observing of procedural requirement of Rule 4(4) cannot be appreciated - also the penalty was originally imposed under section 11AC of the Act which stand already set aside by Commissioner (Appeals). As such fresh imposition of penalty under Rule 25 of Central Excise Rules 2002 in the absence of any evidence by the Revenue cannot be appreciated - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Alleged clearance of finished goods without payment of duty.
2. Imposition of penalty under Rule 25 of Central Excise Rules.

Issue 1: Alleged clearance of finished goods without payment of duty

The case involved an appellant engaged in the manufacture of Amla Candy falling under Chapter Heading No. 20 of the Central Excise Tariff Act, 1985. The appellant was accused of clearing finished goods in bulk quantity to cold storages without processing them, resulting in duty evasion of &8377; 3,59,629 between April 2011 to February 2015. The adjudicating authority confirmed the duty demand and imposed penalties under Section 11 AC of the Central Excise Act, 1944. On appeal, the Commissioner (Appeals) set aside the demand and penalty but imposed a penalty of &8377; 50,000 under Rule 25 of Central Excise Rules, which was challenged in the present appeal.

Issue 2: Imposition of penalty under Rule 25 of Central Excise Rules

The appellate authority noted that the appellant had sent goods to cold storages for preservation without obtaining permission under Rule 4(4) of the Central Excise Rules, 2002. The authority observed that the appellant had declared the goods sent for preservation would be processed by the cold storage as job work, which was not the case. The appellant admitted the lapse of not obtaining permission under Rule 4(4) but showed readiness to pay the penalty. The appellate authority found the appellant liable for penalty for not declaring facts correctly and not obtaining permission. However, it held that the appellant could not be charged with clandestine removal of goods or intent to evade duty under Section 11 AC of the Central Excise Act, 1944. Therefore, the penalty was imposed under Rule 25 of the Central Excise Rules, 2002, citing precedents where penalty could be imposed without mens rea or wilful intention. The appellate authority found no malafide on the part of the appellant and set aside the penalty imposed under Rule 25, considering the absence of evidence by the Revenue.

In conclusion, the appellate tribunal set aside the penalty imposed under Rule 25 of the Central Excise Rules, 2002, as there was no evidence of malafide intent on the part of the appellant. The tribunal found that the penalty was unjustified solely based on procedural non-compliance and in the absence of any fraudulent activities. The appeal was allowed, providing consequential relief to the appellants.