2023 (9) TMI 291 - AT - Central Excise

Non-imposition of penalties under Rule 25(1)(a), 25 (1) (d) and 27 of Central Excise Rules - respondent claimed refund as self-credit for the months of April and May, 2008 @36%, but after amendment to the Notification on 10/06/2008 as stated above they claimed refund as self credit of differential amounts of Rs. 30,06,458/- and Rs. 43,06,368/- (difference of 75% and 36% of value addition) for the months of April and May, 2008 - HELD THAT - It is noted that the penal provisions under Rule 25(1) of the Central Excise Rules, 2002 are subject to Section 11AC of the Central Excise Act, 1944 which shows that penalty is imposable if there is intention to evade payment of duty as mens rea is a necessary ingredient before imposition of penalty under Rule 25. The Ld. Commissioner in Para 19 of the impugned order has given the reasons for non-imposing the penalty holding that There is nothing on record which may warrant invocation of the provisions of Section 11AC of the Act. Further, I observe that the Noticee have kept the department informed of all the facts. In view of the above facts, the Noticee are not liable to penalty under Rule 25(1)(a), 25(1)(d) and 27 of the Rules. I observe that recovering or erroneous refund alongwith interst under Section 11AB of the Act, shall meet the end of justice. It is also a fact that the appellant has applied for the fixation of special rate vide his application dated 27.05.2008 whereas the revenue has approved the special rate after more than one and half year which has caused loss to the respondent and they had to refund the amount with interest which is appropriated in the impugned order. There are no infirmity in the impugned order passed by the Ld. Commissioner - appeal of Revenue dismissed.

Summary

Issues involved:
1. Whether the respondent availed excess refund under the exemption notifications.
2. Whether the respondent is liable for penalties under Rule 25(1)(a), 25(1)(d), and 27 of the Central Excise Rules, 2002.

Summary:

Issue 1: Excess Refund under Exemption Notifications

The respondent, engaged in manufacturing Cement and Clinker, availed the benefit of exemption Notification No. 56/2002-CE, which was amended by Notification No. 34/2008-CE to increase the exemption on value addition from 36% to 75%. The respondent claimed refunds at the increased rate for April and May 2008, even though the amendment was effective from 10/06/2008. A show cause notice was issued, and the demand of Rs. 1,09,49,725/- along with interest was confirmed. The respondent paid the amount, but no penalty was imposed by the adjudicating authority.

Issue 2: Liability for Penalties

The Revenue appealed against the non-imposition of penalties. The Ld. DR argued that the respondent availed the benefit of the notification with malafide intention and without any written clarification from CBEC. The respondent contended that they acted under a bona fide mistake and had informed the department about their intention to take the refund. The Ld. Commissioner observed that there was no fraud, suppression, or wilful misstatement by the respondent, and thus, penalties under Rule 25 and 27 were not warranted. The Commissioner noted the delay by the Revenue in fixing the special rate, which caused financial loss to the respondent.

Judgment:

The tribunal upheld the Commissioner's decision, stating that penalties under Rule 25(1) are subject to Section 11AC of the Central Excise Act, which requires proof of fraud, collusion, or wilful misstatement. The Commissioner's detailed reasoning in Para 19 of the impugned order was found justified. The appeal by the Revenue was dismissed, and the impugned order was upheld.