Commissioner Of Central Excise, Nashik vs Mrm Electrical Industries

(Arising out of Order-in-Appeal No. AKP/173/NSK/2010 dated 9.6.2010 passed by Commissioner of Central Excise (Appeals), Nashik)

For approval and signature:

Honble Mr. S.S. Garg, Member (Judicial) ======================================================

1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

2. Whether it should be released under Rule 27 of the :

CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

3. Whether Their Lordships wish to see the fair copy : Seen of the Order?

4. Whether Order is to be circulated to the Departmental : Yes authorities?

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Commissioner of Central Excise, Nashik Appellant Vs. MRM Electrical Industries Respondent

Appearance: Shri Sanjay Hasija, Superintendent (AR), for appellant None for respondent

CORAM: Honble Mr. S.S. Garg, Member (Judicial)

Date of Hearing: 23.10.2015 Date of Decision: 23.10.2015

ORDER NO

This appeal is directed against order-in-appeal No. AKP/173/NSK/2010 dated 9.6.2010 passed by Commissioner of Central Excise (Appeals), Nashik, vide which the learned Commissioner (Appeals) has upheld the decision of the adjudicating authority and modified the penalty from Rs.1,00,000/- imposed under Rule 25 of the Central Excise Rules, 2002 to Rs.5,000/- under Rule 27 of the Central Excise Rules, 2002. Now by the present appeal, the Revenue has challenged the reduction of the penalty on the respondent.

2. Brief facts of the case are that the respondent is a manufacturer of transformer falling under Chapter Heading 85040000 of the Central excise Tariff Act, 1985. During the scrutiny of their accounts, it was observed that the respondent had contravened the provisions of Rule 8(3) of the Central Excise Rules, 2002 by not paying the duty by due date as specified under Rule 8(1) of the Central Excise Rules, 2002. During the month of June 2002, out of the total duty of Rs.2,18,931/- for the month, the respondent had paid Rs.1,49,920/- before the due date and the remaining amount of Rs.69,011/- was paid on 28.5.2009, i.e. beyond 30 days from the due date. During the period of default, the respondent was required to pay duty through PLA and on consignment basis. However, during the said period, the respondent had paid duty of Rs.6,45,154/- through cenvat credit. Thereafter, show cause notice dated 15.6.2009 was issued asking the respondent as to why duty paid through cenvat credit account during the period should not be recovered in cash i.e. PLA under Section 11A of the Central Excise Act, 1944 and why action under Rule 25 of the Central Excise Rules, 2002 should not be taken against them.

3. The Additional Commissioner vide order dated 31.12.2009 confirmed the duty demand of Rs.6,45,154/- under Section 11A together with interest under Section 11AB of the Act and imposed a penalty of Rs.1,00,000/- under Rule 25 of the Central Excise Rules, 2002 on the respondent. The respondent filed appeal against the said order before the Commissioner (Appeals) who vide stay order dated 18.5.2010 directed the respondent to pre-deposit Rs.6,45,154/- within 10 days and the respondent vide letter dated 7.6.2010 furnished the proof of deposit and complied with the order. Thereafter the Commissioner (Appeals) upheld the order of the Additional Commissioner but modified the penalty from Rs.1,00,000/- to Rs.5,000/-.

4. Heard the learned AR for the appellant and perused the records.

5. The learned AR submitted that the decision of the Commissioner (Appeals) reducing the penalty from Rs.1,00,000/- imposed under Rule 25 to Rs.5,000/- under Rule 27 is not tenable and sustainable in law. He further submitted that the observation of the Commissioner (Appeals) in the case of default in payment of duty in contravention of Rule 8(1) cannot be equated with evasion of duty attracting Section 11AC and Rule 25, is not proper and legal. It is pertinent to reproduce Rule 8 as below:-

Rule 8- Manner of payment (1) The duty on the goods removed from the factory or the warehouse during a month shall be paid by [the 6th day of the following month, if the duty is paid electronically through internet banking and by the 5th day of the following month, in any other case:

(3A) If the assessee defaults in payment of duty beyond thirty days from the due date, as prescribed in sub-rule (1), then notwithstanding anything contained in said sub-rule (1) and sub-rule (4) of rule 3 of CENVAT Credit Rules, 2004, the assessee shall, pay excise duty for each consignment at the time of removal, without utilizing the CENVAT credit till the date the assessee pays the outstanding amount including interest thereon; and in the event of any failure, it shall be deemed that such goods have been cleared without payment of duty and the consequences and penalties as provided in these rules shall follow.

6. I have gone through the order passed by the learned Commissioner (Appeals). The only point for my consideration in this appeal is whether the default committed by the respondent under Rule 8 warrants penalty under Rule 25 as held by the Additional Commissioner, or Rule 27 as held by the Commissioner (Appeals). I find that while deciding this issue, the learned Commissioner (Appeals) in para 6.4 has observed as under:-

6.4 Coming to the imposition of penalty under Rule 25 of CER, 2002 in case of delayed payments, I would refer to the case law of Condor Power Products Pvt. Ltd. Vs CCE Faridabad reported at 2007(210) ELT 137 (Tri.-Del.)., wherein the Hon'ble CESTAT has upheld that penalty under Rule 25 is not imposable in case of delayed payments due to financial crisis. Relevant para 5 is reproduced, below:-

"5. Since there is no dispute over the fact that the late payment of duty was, according to the appellant, as explained by them from time to time to the Revenue authorities, due to financial crises, and that the returns were duly filed disclosing all these transactions. It would appear that the liability to pass duty was never disputed and that, subject to the liability to pay interest on the delayed payment, there was no warrant for imposing penalty under Rule 25, since it was obvious that, having disclosed the liability in their returns and pleading financial crisis as the cause of delay, there could not have been any intention to evade the payment of duty. Inference of evasion of duty cannot be drawn from mere delay in making the payment of tax in respect of the transactions already disclosed in the returns which were filed in time. Therefore, the imposition of penalty of Rs 2,50,000/- under the impugned order cannot be sustained. "

6.5 CESTAT, Ahmedabad in case of Ganpati Alloys Vs CCE, Vapi reported at 2009(92) RLT 844 (CESTAT-Ahmd.) has noted that law on the issue of penalty stands decided by Saurashtra Cements Ltd referred above, in which case it has been held that in cases of the delay in payment of duty, it is provisions of Rule 27 which have to be invoked. Relevant portion of para 02 is reproduced below: -

"/ note that the law on the issue of penalty stands decided by Saurastra Cement Ltd referred above, in which case it has held that in cases of delay in payment of duty, it is the provisions of Rule 27 which have to be invoked-As the said provision provides for maximum penalty of Rs 5,000/-. I reduce the penalty to Rs 5,000/-. But for the above modification in the quantum of penalty the appeal is otherwise rejected."

6.6 In case of Praveen Foundry Vs CCE Coimbatore reported at 2009 (94) RLT 717 (CESTAT-Chennai.), the CESTAT has upheld that in case of delayed payment penalty can be imposed under Rule 27 of CER, 2002 and not under Rule 25. Relevant para 3 is reproduced below.

"3. / have carefully considered the facts of the case and the rival submissions. The violation found against the appellants arises on account of removal of excisable goods by debiting the Cenvat account instead of PLA account during the period 05-09-2007 to 12-09-2007. The appellants since remitted the duty in PLA and also paid the applicable interest on 18-09-2007. The appellants seek reduction of penalty to Rs 5,000/- relying on a decision of the Tribunal in the Saurashtra Cement Ltd (supra). I find that in that decision, in a similar case, the Tribunal held that penalty could not be imposed under Rule 25 of the CER unless there was contravention of the nature referred to in Clauses, (a), (b), (c) ft (d) of the Rule 25. When goods were removed without payment of duty on such consignment the appellants had not contravened any statutory provision. As regards the applicability of Rule 25 of the CER, the Tribunal found as follows.

7. In view of the law cited by the learned Commissioner (Appeals) in his order, I am of the considered opinion that the default committed by the appellant is not such so as to attract penalty under Section 11AC and Rule 25 of the Central Excise Rules, 2002. Further, the penalty imposed on the respondent under Rule 25 is perfectly in accordance with law and I uphold the decision of the Commissioner (Appeals) and dismiss the appeal of the Revenue.

(Pronounced in Court)

(S.S. Garg) Member (Judicial)

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