M/S. A. S. Shoes vs C.C.E. Kanpur

[Arising out of Order-In-Appeal No. 44-CE/APPL/KNP/2013 dated: 30.10.2013 passed by Commissioner (Appeals) Kanpur]

For approval and signature:

Hon'ble Mr. S.K. Mohanty, Member (Judicial)

1 Whether Press Reporters may be allowed to see 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 of the Order?

4 Whether Order is to be circulated to the Departmental authorities?

M/s. A. S. Shoes ...Appellant

Vs.

C.C.E. Kanpur Respondent

Appearance:

Ms. Surabhi Sinha (Advocate) for the Respondent

Mr. Pramod Kumar, DR for the Appellants

CORAM:

Hon'ble Mr. S.K. Mohanty, Member (Judicial)

Date of Hearing.23.06.2015

Final Order No. 53087 /2015_

Per S K Mohanty:

Brief facts of the case are that appellant did not discharged the Central Excise duty liability for the quarter ending 31.12.2010 within the stipulated time frame as prescribed under Rule 8(1) of the Central Excise Rules, 2002. Outstanding amount towards duty along with interest was paid by the appellant on 15.02.2011. Thereafter, the SCN was issued by the Central Excise Department seeking recovery of the duty amount together with interest and imposition of penalty under Rule 25 & Rule 27 of the Central Excise Rules. The SCN was adjudicated vide order dated 30.11.2012, wherein Rs. 1,67,717/- towards duty liability was confirmed and the amount already deposited by the appellant was appropriated. Besides, equal amount of penalty under Rule 25 and Rs. 20,000/- under Rule 27 of the Central Excise Rules, 2002 have also been imposed in the said order. In appeal, the Commissioner (Appeals) has reduced the quantum of penalty under Rule 25 to Rs. 50,000/- and dropped the penalty imposed under Rule 27. Imposition of penalty amount under Rule 25 is the subject matter of present dispute.

2. The Ld. Advocate Miss Surabhi Sinha appearing for the appellant submits that since the amount of duty along with interest was deposited before issuance of SCN, there was no necessity for initiation of proceedings for imposition of penalty, in terms of Section 11A(2A) of the Central Excise Act, 1944. She further submits that since there is no element of suppression, misstatement, fraud, collusion etc. on the part of the appellant in defrauding the Government Revenue, invocation of Rule 25 is not justified for imposition of penalty. In this context Ld. Advocate relies on the Judgment of Honble Gujarat High Court in the case of CCE vs Saurashtra Cement Ltd. reported in 2010 (260) ELt 71 (Guj).

3. Per contra the Ld. Jt. CDR Sh. Pramod Kumar appearing for the Revenue reiterates the findings recorded in the impugned order.

4. I have heard the Ld. Counsel for both the sides and perused the records.

5. It is an admitted fact that the duty amount in question along with interest was paid by the appellant on 15.02.2011 and thereafter, the SCN was issued on 13.12.2011. Since, the amount of duty along with interest has been paid by the appellant on its own ascertainment and over and above such amount, no further amount towards Central Excise duty or interest was payable, there was no necessity for issuance of SCN, or for adjudication of the matter in view of the provisions of Section 11A(2B) of the Central Excise Act, 1944. As per the statutory mandates, upon payment of duty amount the issue has to be statistically closed for all practical purposes. Thus, I am of the view that issuance of SCN and adjudication of the matter in imposing the penalty under Central Excise Rules was not justified in the circumstances of the case. Further, in absence of suppression, misstatement, collusions etc., penal provisions contained in Rule 25 of the Central Excise Rules, 2002 cannot be invoked, justifying imposition of penalty. It is an admitted fact on record that the authorities below have not specifically observed that non-payment of duty within the prescribed time limit is attributable to the ingredients mentioned in the said rule. Thus, I am of the view that imposition of penalty under Rule 25 is not legal and proper. In this context, the Honble Gujarat High Court in the case of Saurashtra Cement (Supra) has held as unders:

16. The Tribunal considering Rule 25 has observed in its order that Rule 25 provides for imposition of penalties which shall not exceed the duty on the excisable goods, when there is contravention of the nature referred to in clause (a), clause (b), clause (c) or clause (d). The Tribunal found that clause (a) of Rule 25 refers to removal o excisable goods in contravention of any of the provisions of the Rules. When goods were removed, no excise duty was required to be paid at that point of time. As such, it cannot be said that the contravention of the nature mentioned in the said clause has been committed by the assessee. Clause (b) is to the effect that the manufacturer does not account for any excisable goods manufactured by him. The said clause does not stand contravened inasmuch as the goods were duly reflected in the statutory records. Similarly, clause (c) does not stand contravened inasmuch as the assessee has not manufactured goods without applying for registration. Clause (d) refers to contravention of any of the provisions of the Rules with intent to evade payment of duty. Excisable goods were entered in records, cleared on Central Excise invoices and duty was also paid subsequently, though belatedly along with interest. As such, the said clause (d) is also not contravened. After analyzing and examining all these four sub-clauses of Rule 25, keeping in mind the facts of the case, the Tribunal held that invocation of Rule 25 for imposition of penalty for delayed deposit of duty is not in accordance with law.

17. It is also to be borne in mind that Rule 25 starts with the word Subject to the provisions of Section 11AC... Section 11AC of the Central Excise Act deals with penalty for short levy or non-levy of duty in certain cases. It says that where any duty of excise has not been levied or paid or has been short levied or short paid or erroneously refunded by reasons of fraud, collusion or any willful misstatement or suppression of facts, or contravention of any of the provisions of this Act or of the Rules made there under with intent to evade payment of duty, the person who is liable to pay duty as determined under sub-section (2) of Section 11AC, shall also be liable to pay a penalty equal to the duty so determined. For the purpose of invoking Section 11AC of the Act, the condition precedent is that the duty has not been levied, or paid or short-levied or sort-paid or the refund is erroneously granted by reasons of fraud, collusion or any willful misstatement of suppression of facts. If these ingredients are not present, penalty under Section 11AC cannot be levied. Since, Rule 25 can be invoked subject to the provisions of Section 11AC of the Act, as natural corollary, the ingredients mentioned in Section 11AC are also required to be considered while determining the question of levying of penalty under Rule 25 of the Central Excise Rules.

6. In view of the settled position of law, there is no substance in the impugned order, justifying imposition of penalty. Therefore, the impugned order is set aside and the appeal is allowed in favour of the appellant.

(Dictated and pronounced in open court)

(S. K. Mohanty)

Member(Judicial)

Neha

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