Custom, Excise & Service Tax Tribunal
4. Whether Order Is To Be Circulated To ... vs M/S Akar Ltd on 8 August, 2011
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT AHMEDABAD
(COURT- II(
Appeal No.E/717/2010
Arising out of: OIA No.KRS/40/VAPI/2010, dt.24.02.2010
Passed by: Commissioner of Central Excise & Customs (Appeals), Vapi
For approval and signature:
Mr. B.S.V. Murthy, Honble Member (Technical)
1. Whether Press Reporters may be allowed to see the No
Order for publication as per Rule 27 of the CESTAT
(Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the Yes
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether their Lordships wish to see the fair copy of Seen
the order?
4. Whether order is to be circulated to the Departmental Yes
authorities?
Appellant:
M/s Akar Ltd.
Respondent:
CCE Vapi Represented by:
Shri K.L. Ramteke, Consultant for Assessee.
Shri R.Srova, JDR for the Revenue.
CORAM:
MR. B.S.V. MURTHY, HONBLE MEMBER (TECHNICAL) Date of Hearing:08.08.11 Date of Decision:
ORDER No. /WZB/AHD/2011, dt.________ Per: Mr.B.S.V. Murthy:
The appellants defaulted in monthly payment of duty in the month of July 2008 to November 2008 beyond 30 days and cleared the goods by utilizing the CENVAT Credit and without payment of duty exclusively from the account current during the default period. Treating this as contravention of provisions of Rule 8(3A) of Central Excise Rules, 2002 (Rules), proceedings were initiated which culminated in confirmation of demand of duty of Rs.8,24,877/- (Rupees Eight Lakhs, Twenty Four Thousands, Eight Hundred, Seventy Seven only). Further, penalty of Rs.5 lakhs (Rupees Five Lakhs only) has been imposed under Rule 25 of Central Excise Rules, 2002.
2. Ld. Consultant on behalf of the appellant relied upon the decisions of Hon'ble High Court of Allahabad in the case of CCE Meerut Vs Kitply Industries Ltd 2010 (252) ELT 18 (All.), to submit that penalty under Section 11AC was not imposable and maximum penalty that can be imposed is only Rs.5,000/- (Rupees Five Thousands only) in cases where default has occurred because of bonafide mistaken belief. He also relied upon the decision of the Tribunal in the case of CCE Mangalore Vs Ramson Rigid PVC Pipes 2010 (254) ELT 473 (Tri-Bang), to submit that there was no intention to evade payment of duty and therefore penalty under Section 11AC was not warranted. He relied upon the decisions in the cases of Tejpal Paper Mills Ltd Vs CCE Ahmedabad 2010 (259) ELT 79 (Tri-Ahmd), CCE Vs Saurashtra Cement Ltd 2010 (260) ELT 71 (Guj), to submit that no penalty under Rule 25 can be imposed and maximum penalty that can be imposed would be under Rule 27, which is Rs.5,000/- (Rupees Five Thousands only).
3. Ld.JDR reiterates the reasoning adopted in the impugned order.
4. I have considered the submissions made by both sides. There is no dispute that default occurred beyond 30 days.
5. During the period 1.4.03 to 31.3.05, Rule 8(3) reads as under:
(3) If the assessee fails to pay the amount of duty by the due date, he shall be liable to pay the outstanding amount along with interest @ 2% per month or Rs.1,000/- per day, whichever is higher, for the period starting with the 1st day after due date till the date of actual payment of the outstanding amount:
Provided that the total amount of interest payable in terms of this sub-rule shall not exceed the amount of duty which has not been paid by due date.
Provided further that till such time, the amount of duty outstanding and the interest payable thereon are not paid, it shall be deemed that the goods in question in respect of which the duty and interest are outstanding, have been cleared without payment of duty and the consequences and the penalties as provided in these rules shall follow. 5.1 Rule 8(3A) was introduced w.e.f. 1.4.05 by Notification No.17/2005-CE(NT), dt.31.3.05 which reads as under:
If the assessee defaults in payment of duty by the date prescribed in sub-rule (2) and the same is discharged beyond a period of 30 days from the said date, then the assessee shall forfeit the facility to pay the duty in monthly installments under sub-rule (1) for a period of 2 months, starting from the date of communication of the order passed by the Assistant Commissioner of Central Excise or the Dy.Commissioner of Central Excise, as the case may be, in this regard or till such date on which all dues including interest thereof are paid, whichever is later, and during this period notwithstanding anything contained in sub-rule (4) of rule 3 of CENVAT Credit Rules, 2004, the assessee shall be required to pay Excise duty for each consignment by debit to the account current 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. It is evident from the said rule that in the case of default for more than 30 days, the monthly payment facility was not available for a period of 2 months starting from the date of communication of the order passed by the Assistant Commissioner or the Dy.Commissioner. Thus, there was need for passing an order by the Assistant Commissioner or Dy.Commissioner. 5.2 However, w.e.f. 1.6.06, vide Notification No.13/2006-CE(NT), dt.1.6.06, Rule 8(3A) was replaced, which reads as under:
(3A) If the assessee defaults in payment of duty beyond 30 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 assesssee 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. 5.3 It can be seen that w.e.f. 1.6.06, Rule 8(3A) provided that in the case of default beyond 30 days, the facilities of monthly payment of duty and utilization of CENVAT Credit during the period of default was withdrawn without any necessity of any specific order in this regard by the Assistant Commissioner or the Dy.Commissioner. It has become the responsibility of the assessee to pay duty consignment-wise from account current and clear the goods. In the event of failure, the goods were to be deemed to have been cleared without payment of duty and the consequences and penalties as provided in the Central Excise Rules were to follow.
6. The decisions cited by ld.Consultant, to submit that the penalty under Rule 27 only is imposable and not under Rule 25, were rendered prior to amendment of Rule 8 (3A) of Rules. In the case of Saurashtra Cement Ltd., the Hon'ble High Court of Gujarat held that penalty under Rule 25 would be imposable in case the default in payment of duty because of none of the ingredients mentioned in Rule 25, would be applicable. It was observed in that case that Clause a of Rule 25, which refers to removal of excisable goods in contravention of any of the provisions of Rules, was not applicable since during the relevant period at the time of removal of the goods, no duty was required to be paid. However, under Rule existing during the period when default occurred in this case, once there was a default beyond 30 days, duty was required to be paid in respect of each consignment by debiting account current and CENVAT amount could not have been used. Therefore, the facts in this case are clearly distinguishable from the decision in the case of Saurashtra Cement Ltd. The same principle would apply to the case of Tejpal Paper Mills also. Further, in the case of Ramson Rigid PVC Pipes, penalty under Rule 25 was upheld. In the case of Kitply Industries, the default occurred because no cheque was dis-honoured which was rectified with interest. Hence, that decision is not applicable. The facts in this case are entirely different. On the other hand, I find that there are several decisions, wherein a view has been taken that penalty under Rule 25 is imposable in contravention of provisions of Rule 8(3A) of Rules and the decisions are as under:
i) Siddheswari Industries Vs CCE Ahmedabad 2010 (259) ELT 144 (Tri-Ahmd)
ii) Parekh Bright Bars (P) Ltd. Vs CCE Belapur 2010 (249) ELT 298 (Tri-Mum)
iii) Krishna Chemicals Vs CCE Ahmedabad 2009 (244) ELT 580 (Tri-Ahmd)
iv) Sam Turbo Industries Ltd Vs CCE Salem 2006 (200) ELT 87 (Tri-Chennai)
v) Sai Packaging Industries Vs CCE Chennai 2010 (253) ELT 107 (Tri-Chennai)
vi) A.R. Metallurgicals (P) Ltd. Vs CCE Chennai 2011 (263) ELT 411 (Tri-Chennai)
vii) CCE Vs Gre Shyam & Co.
2009 (246) ELT 291 (Tri-Del)
7. The discussion above clearly shows that none of the decisions cited by the ld. Consultant are applicable to the facts of this case and penalty under Rule 25 is imposable.
8. While upholding penalty imposed, it also becomes necessary to examine the circumstances under which the default occurred since penalty under Rule 25 is not a mandatory penalty but subject to a minimum of Rs.2,000/- (Rupees Two Thousands only) and maximum equal to duty payable. The appellant has cited the decisions of another Commissioner (Appeals), to submit that in this case, the Commissioner has reduced the penalty to 4.27% of the disputed duty whereas in that case, the comm. reduced the penalty to Rs.5 lakhs (Rupees Five Lakhs only), which comes to 65.6% of the duty, to submit that this is very harsh and unjustified. However, nowhere there is explanation given as to why the default occurred. Nevertheless, it would not be fair to impose penalty to the extent of 60% of duty when the omission is limited to default of payment of duty and the same has been discharged with interest. In fact, CENVAT account has been debited and therefore it cannot be said that there was removal without payment of duty. It is only a deemed removal without payment of duty. Under these circumstances, penalty of Rs.5 lakhs (Rupees Five Lakhs only) vis-a-vis duty involved of Rs.8.25 lakhs (Rupees Eight Lakhs, Twenty Five Thousands only) is harsh and reduction is warranted. I consider that penalty of Rs.50,000/- (Rupees Fifty Thousands only) under Rule 25 would meet the ends of justice in this case. Accordingly, while rejecting the appeal otherwise, penalty is reduced to Rs.50,000/- (Rupees Fifty Thousands only).
(Pronounced in Court on ________________) (B.S.V. Murthy) Member (Technical) cbb 7