CX - Reasoning given by Tribunal for vacating penalty imposed u/s 11AC of CEA, 1944 will equally enure in favour of assessee in respect of penalty u/r 25 of CER, 2002: HC
By TIOL News Service
CHENNAI, NOV 12, 2018: THE appellants are a 100% EOU and are entitled clearances upto 50% of the FOB value of exports into DTA. They have cleared the goods to their DTA unit in the months of January, April, May and August, 2011 without payment of duty.
Accordingly, a SCN dated 20.01.2012 was issued to the appellant demanding duty of Rs. 1,12,25,765/- along with the proposal for interest and penalty u/s 11AC of the CEA, 1944 and also under Rule 25 of CER, 2002.
The adjudicating authority confirmed the demand and also appropriated the entire duty amount paid along with interest amount of Rs.15,47,788/- towards interest demand of Rs.17,35,425/- and imposed equivalent penalty u/s 11AC r/w rule 25 of CER, 2002.
In appeal before CESTAT, the appellant contested the interest amount of Rs.1,87,637/- (which was not paid) by contending that they had computed interest from the due date (5th of the next month) to the date of payment of duty and, therefore, no further amount is payable; that there is no suppression of facts with an intention to evade duty as they have filed ER-2 returns regularly for the impugned period wherein they have indicated the duty amount in the column 'duty payable' but the column under 'duty paid' was left blank and, since the duty amount has been paid before passing of the adjudication order, no penalty is imposable u/s 11AC r/w rule 25 and that the company is under BIFR.
The CESTAT held that the statutory interest rate from 01.04.2011 had increased to 18% and, therefore, the computation by Revenue was correct inasmuch the difference is payable by the assessee; that the entire case is basically a delayed payment under rule 8 of CER; that before issuance of SCN appellant paid Rs.45 lakhs and the balance was paid with interest before issuance of adjudication order; that there is no mens rea or intention to evade payment of duty so as to invoke penalty u/s 11AC; that penalty u/s 11AC is not sustainable; that appellants are liable for penalty u/r 25 of CER, 2002 which is fixed at Rs.5 lakhs.
We reported this order as - 2016-TIOL-1160-CESTAT-MAD.
The assessee challenges this order on the following questions of law -
1. Whether the second respondent is correct in imposing penalty of Rs. 5,00,000/- under Rule 25 of Central Excise Rules, 2002 without any finding on the reason and justification for imposition of penalty?
2. Whether the second respondent is correct in imposing penalty of Rs. 5,00,000/- under Rule 25 of Central Excise Rules, 2002 when none of the situations of Rule 25 is prevalent?
3. Whether the second respondent is correct in holding that the penalty of Rs. 5,00,000/- is payable under Rule 25 of Central Excise Rules, 2002 without considering the fact that the appellant is a sick company and the proceedings are pending before BIFR?"
The High Court extracted rule 25 of the CER, 2002 and inter alia observed thus -
+ Admittedly, there is no allegation that the assessee removed excisable goods in contravention of the provisions of the Rules. Therefore, Sub-Clause (a) of Rule 25(1) would not be attracted.
+ The record of the proceedings shows that the assessee had accounted for the excisable goods. Therefore, contingency contemplated in Clause (b) of Rule 25(1) of the Rules also will not be attracted. As the assessee possesses a registration certificate, Clause (c) of Rule 25(1) cannot be invoked.
+ Thus, the Revenue, to sustain the penalty, should bring the case of the assessee under Clause (d) of Rule 25(1) of the Rules, where they could show that the assessee contravened the provisions of the Rules with intent to evade payment of duty. Admittedly, the Tribunal while passing the impugned order did not give any reason as to why the penalty of Rs.5,00,000/- should be confirmed.
+ Tribunal has granted full relief to the assessee, insofar as the penalty, which was imposed under Section 11AC of the Act, on the ground that there is no mens rea.
+ We find from the factual position placed before us that the assessee is in deep financial distress and they are before BIFR.
+ In somewhat identical circumstances, the Division Bench in the case of Commissioner vs. Ramanasekar Steels Ltd. - 2013-TIOL-662-HC-MAD-ST … found that the Tribunal was justified in setting aside the penalty, as the assessee was going through financial constraint and accordingly, dismissed the appeal filed by the Revenue. [Andhra Cements Limited - 2007-TIOL-803-HC-AP-CX also relied upon.]
+ The appellant/assessee before us is more or less in the identical position as that of Ramanasekar Steels Ltd., and we are of the considered view that similar benefit can be granted to the assessee in this appeal.
+ As pointed out earlier, in the instant case, the Tribunal has not recorded any finding as to which of the clauses under Rule 25 of the Rules were attracted. Therefore, the decision in the case of Amrit Foods - 2005-TIOL-164-SC-CX also comes to the aid of the assessee.
Concluding that the reasoning given by the Tribunal for vacating the penalty imposed u/s 11AC of the Act will equally enure in favour of the assessee in respect of penalty under Rule 25 of the Rules, the order of the Tribunal imposing penalty of Rs.5 lakhs u/r 25 of CER, 2002 was set aside.
The Civil Micelllaneous Appeal filed by the assessee was allowed.
(See 2018-TIOL-2379-HC-MAD-CX)
