Case Digest On Penalty Under Central Excise Rules, 2002

Penalties under the Central Excise Rules, 2002 are imposed for non-compliance with various provisions of the Central Excise Act, 1944. It was aimed to prevent evasion of duties, and maintain discipline in excise administration.

• Penalty for Failure to Pay Duty as per Rule 8:  If an assessee fails to pay duty by the due date, they are liable to, Interest on the delayed payment at the prescribed rate. A penalty equivalent to 10% of the duty unpaid or ₹5,000, whichever is higher is imposed.

• Penalty for Non-registration as per Rule 9: Any person required to register under the rules but fails to do so may face a penalty up to ₹10,000 or an amount equivalent to the duty involved, whichever is greater and prosecution under the Act in severe cases.

•  Penalty for Non-maintenance of Records as per Rule 10: When any one is failing to maintain proper accounts or documents as required can lead to penalty up to ₹10,000 or the amount of duty involved, whichever is higher.

• Penalty for Non-submission of Returns as per Rule 12: Late or non-filing of returns such as ER-1, ER-2, etc., can attract a penalty up to ₹5,000 for each return not filed or delayed.

• Penalty for Fraudulent Activity as per Section 11AC of the Central Excise Act, 1944: Mostly the penalty imposed on this provision. For deliberate evasion of excise duty by fraud, suppression of facts, or collusion a penalty equal to the entire amount of duty evaded.

Penalty under Rule 25 of Central Excise Rules relies on “intention to evade” u/s 11 of Excise Act: Punjab & Haryana HC Nandan Auto Tech Limited vs Commissioner of Central Excise CITATION: 2024 TAXSCAN (HC) 1099

The Punjab and Haryana High Court has noted that the penalty under Rule 25 of the Central Excise is applicable only on satisfaction of the ingredients given in Section 11 of the Central Excise Act, 1944.

It was observed that, “A perusal of the record shows that there was no intention to evade duty, which is requisite of Section 11AC of the Act. And Rule 25 of the Rules 2002 is not an independent rule and cannot be invoked unless it covers the ingredients to impose penalty as imposed in Section 11AC of the Act.”

Intention to Evade Payment of Excise duty not Established: CESTAT quashes Penalty u/r 25 of Central Excise Rules [Read Order]  The Commissioner of Central Excise vs M/s Komal Enterprises CITATION: 2024 TAXSCAN (CESTAT) 232

The Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) quashed penalty under Rule 25 of the Central Excise Rules, 2002 as the intention to evade payment of excise duty was not established.

A Two-Member Bench comprising SS Garg, Judicial Member and P Anjani Kumar, Technical Member observed that “It is clear from the above that the provision under Rule 25 (1) (d) also makes intent to evade payment of duty the foremost condition to invoke this Section. As discussed above, though the intent to evade payment of duty is cursorily alleged, it is not established with evidence. Therefore, we are of the considered opinion that the conditions for imposing penalty under Rule 25 are also not satisfied and that Commissioner was correct in concluding that no case for imposition of penalty has been made by the Revenue.”

Penalisation under Rule 26 of Central Excise Rules, Allowable only if Party is Involved in Various Activities of Handling Goods, Which are Liable for Confiscation: CESTAT

Qumruzzama Khan vs C.C.E. & S.T CITATION: 2023 TAXSCAN (CESTAT) 916 Counsel for Appellant: Shri Parth Mullick Counsel for Respondent: Shri P. K. Singh

The Ahmedabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), ruled that the Penalisation under Rule 26 of Central Excise Rules is allowed only if party is involved in various activities of handling of goods, which are liable for confiscation.

“In the present case the entire case of the department is that there is no movement of goods but it is a paper transaction and the M/s Nitin Global Ltd, who has taken Cenvat credit, has not received the goods. When this is the case of the department as no goods is involved, consequently, none of the appellants are engaged in handling the goods which is liable for confiscation” the Tribunal concluded.

CESTAT sets aside Penalty under Rule 26 due to Lack of Confiscation and Invoice Involvement

Gouri Shankar Poddar vs Commissioner of C.E & S.T CITATION: 2024 TAXSCAN (CESTAT) 762 Counsel for Appellant:   Ishan Bhatt Counsel for Respondent: Anand Kumar

In the recent ruling, the Ahmedabad bench of Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) set aside the Rs. 50,00,000 penalty imposed on the appellant under Rule 26 of the Central Excise Rules, 2002.
In this case, the operating order revealed that no goods had been confiscated, making sub-rule (1) inapplicable. Regarding sub-rule (2), the invoices in question were issued by the supplier, not the appellant. Therefore, sub-rule (2) also did not apply. As a result, the penalty could not be imposed under either sub-rule of Rule 26

No Penalty u/s 11AC of Central Excise Act can be imposed in absence of allegation for evasion of excise duty: CESTAT

Siddheshwar SSK Ltd vs Commissioner of Central Excise CITATION: 2023 TAXSCAN (CESTAT) 1337 Counsel for Appellant: Shri J N Somaiya Counsel for Respondent:   Shri Deepak Bhilegaonkar

The Mumbai bench of Customs Excise and Service Tax Appellate Tribunal (CESTAT) held that the penalty under section 11AC of the Central Excise Act, 1944 cannot be imposed in the absence of allegation for evasion of excise duty and modified the impugned order in an appeal by Siddheshwar SSK Ltd (The Appellant) against the Commissioner of Central Excise (CCE) (The Respondent).

The two-member bench consisting of Ajay Sharma (Judicial Member) and C.J. Mathew (Technical Member) after hearing both sides held that “We also find no reason to sustain the penalty imposed under section 11AC of Central Excise Act, 1944 as there is no allegation of evasion of duty otherwise payable on account of non-availability of sufficient credit on clearance of dutiable goods.” The impugned order was modified to limit recovery available under rule 6 of CENVAT Credit Rules, 2004.

Penalty u/s 26(2) of Central Excise Rules is not Applicable to Transaction made Before 01.04.2007: CESTAT

Goodluck Empire vs C.C.E. & S.T CITATION: 2023 TAXSCAN (CESTAT) 769 Counsel for Appellant: Shri Sarju Mehta Counsel for Respondent: Shri R.K.Agarwal,

The Ahmedabad bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that penalty under section 26(2) of the Central Excise Rules, 2002 does not apply to transactions made before 01.04.2007.

Further held that some of the transactions made after 01.04.2007 by the appellant are liable to penalty under Rule 26(2) of Central Excise Rules, 2002. Accordingly the penalty of M/s. Goodluck Empire is reduced from Rs. 8,20,000/- to Rs. 2,00,000/- and partly allowed the appeal.

Penal Provision of Central Excise Rules not to be Invoked against Company Accountants: CESTAT

Nitin M Dhandhukia vs C.C.E.-Ahmedabad-ii CITATION: 2023 TAXSCAN (CESTAT) 538 Counsel for Appellant: Shri Nirav Shah Counsel for Respondent: Shri P.Ganesan

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), observed that the penal provision of the Central Excise Rules, 1944 are not to be invoked against the company accountant.

A Single Bench of CL Mahar, Technical Member observed that “, I find that the appellant was only an accountant who was doing normal accountancy work. The issue of valuation of captively consumed yarn is a matter of the interpretation and therefore the penal provision of Rule 209 A of Central Excise Rules, 1944 cannot be invoked against the person who is only involved in maintaining the accounts of the company.”

No Penalty under Central Excise Act in absence of Suppression of Fact: CESTAT

M/s. Star Battery Limited vs Commissioner of Central Excise CITATION: 2024 TAXSCAN (CESTAT) 828 Counsel for Appellant:   Shri S.P. Siddhanta Counsel for Respondent:   Shri Debapriya Sue

The Kolkata bench of the Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) has held that penalty not imposable under Central Excise Act, 1944 in absence of suppression of fact. The Tribunal found that the adjudicating authority has failed to show any positive act of suppression on the part of the Appellant.

The Tribunal found that the adjudicating authority has failed to show any positive act of suppression on the part of the Appellant. The details of VAT collected and retained by the Appellant are reflected in the audited Profit & Loss account and balance sheet of the impugned periods. The CESTAT held that extended period is not invokable in this case and for the same reason, penalty under Section 11AC of the Central Excise Act, 1944 is also not imposable.

Ingredients for Invocation of Extended Period not Alleged: CESTAT upholds Non-Imposition of Penalty u/s 11A of Central Excise Act

The Commissioner of Central Excise vs M/s Komal Enterprises CITATION: 2024 TAXSCAN (CESTAT) 232

The Chandigarh Bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) upheld the non-imposition of penalty under Section 11A of the Central Excise Act, 1944 as there was no allegation for invocation of extended period.

“The ingredients for invocation of extended period being not even alleged, we are of the considered opinion that the Commissioner was right in his finding. To that extent, we find no infirmity in not imposing penalty under Section 11A of the Central Excise Act, 1944” the Bench noted.

No Penalty under CENVAT Credit Rules in Absence Demand of Excise Duty: CESTAT Rules in Favour of Ultra Tech Cement

Commissioner of Central Excise vs M/s. Ultra Tech Cement Limited (West Bengal Cement Works) CITATION: 2023 TAXSCAN (CESTAT) 421 Counsel for Appellant: Shri P.K.Ghosh Counsel for Respondent: Shri Dipankar Majumdar

In the case of Ultra Tech Cements, the Kolkata bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that penalty under CENVAT Credit Rules, 2004 is not imposable when the demand of duty was quashed by the Tribunal.

A Coram comprising Shri P.K Choudhary, Member(Judicial) and Shri K Anpazhakan, Member(Technical) observed since the entire Order-in-Original was set aside there is no question of any further penalty to be imposed under Section 15(2) of the CENVAT Credit Rules, 2002. The Tribunal dismissed the Appeal filed by the Department and the Cross Objection filed by the Respondent also got disposed of.

Ingredients for Invocation of Extended Period not Alleged: CESTAT upholds Non-Imposition of Penalty u/s 11A of Central Excise Act

The Commissioner of Central Excise vs M/s Komal Enterprises CITATION: 2024 TAXSCAN (CESTAT) 232

The Chandigarh Bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) upheld the non-imposition of penalty under Section 11A of the Central Excise Act, 1944 as there was no allegation for invocation of extended period.

A Two-Member Bench comprising SS Garg, Judicial Member and P Anjani Kumar, Technical Member observed that “Coming to the imposition of penalty under Section 11AC of the Central Excise Act, we find that the terms of the Section are very clear that penalty under the Section can only be imposed when 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 wilful mis-statement or suppression of facts or contravention of any of the provisions of this Act or of the Rules made thereunder with intent to evade payment of duty.” “The ingredients for invocation of extended period being not even alleged, we are of the considered opinion that the Commissioner was right in his finding. To that extent, we find no infirmity in not imposing penalty under Section 11A of the Central Excise Act, 1944” the Bench noted.

CESTAT Quashes Penalty u/r 25 of Central Excise Rules imposed on Manufacture of Textile Machinery on ground of Absence of Malafide Intention

AMBICA ENGINEERING WORKS vs C.C.E. & S.T.-SURAT-I CITATION: 2023 TAXSCAN (CESTAT) 1343 Counsel for Appellant:   Shri S. Suriyanarayanan Counsel for Respondent: Shri P. Ganesan

The Ahmedabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) quashed the penalty under rule 25 of the Central Excise Rules,2002 imposed on the manufacture of textile machinery on the ground of absence of malafide intention.

The Bench observed that there was no malafide intention on the part of the assessee and in the present case also the assessee cannot be liable for penalty under Rule 25 of the Central Excise Rules. The two-member bench comprising Ramesh Nair (Judicial) and Raju (Technical) quashed the penalty imposed under rule 25 of the Central Excise Rules against the assessee.

Penalty under Central Excise Act is not sustainable by Third Party Evidence, can’t claim Duty on Clandestine Removal: CESTAT

SANJAY KUMAR GOYAL vs COMISSIONER, CENTRAL EXCISE & CUSTOMS CITATION: 2022 TAXSCAN (CESTAT) 277 Counsel for Appellant: Shri Vinay K. Jain Counsel for Respondent: Shri Ravi Kapoor

The Delhi Principal Bench of Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that the demand of duty and penalty under the Central Excise Act is not sustainable by the third–party evidence.

The Tribunal observed that the Respondenthas failed to examine its witness in the adjudication proceedings and thus for the absence of compliance with the mandate of Section 9D of the Act. MrAnil Chaudary, Judicial Member, while allowing the appeal has set aside and held that the demand has been confirmed against the appellants with a penalty in a mechanical manner with a lack of corroborative evidence. Shri Vinay K. Jain appeared for the appellant and Shri Ravi Kapoor appeared for the respondent.

Relief to Universal Bituminous Industries, No Penalty u/s 11A (4) in the Absence of Tax Evasion: CESTAT

Universal Bituminous Industries Pvt. Ltd. Vs Commr. of CGST & CX, Howrah Commissionerate CITATION: 2022 TAXSCAN (CESTAT) 723 Case Number: Excise Appeal No. 75699 of 2022 Date of Judgement: 19 December 2022

Relief to Universal Bituminous Industries, the Kolkata Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that penalty under section 11A (4) of the Central Excise Act,1944 is not permissible in the absence of tax evasion.

Further, the appellant filed all the statutory returns and therefore the allegation of fraud, collusion or any willful misstatement or suppression of facts or contravention of any of the provisions of the Act or of the Rules made thereunder with an intent to evade payment of duty is not valid. While allowing the appeal, the impugned orders were set aside. Mr Prashant Kapani, Director for the Appellant and Mr S. S. Chattopadhyay, Authorized Representative for the Respondent.

Authority cannot Mechanically impose Penalty for Short Levy or Non-Levy of Duty u/s 11AC of Central Excise Act: CESTAT

M/s Micky Metals Limited vs Commissioner of CGST & Excise CITATION: 2022 TAXSCAN (CESTAT) 494 Counsel for Appellant: Shri N.K.Chowdhury Counsel for Respondent: Shri S.S.Chattopadhyay

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Kolkata Bench authority cannot mechanically impose penalty for short levy or non-levy of duty u/s 11AC of Central Excise Act, 1994.

A Coram consisting of P K Choudhary, Judicial Member observed that” Thus, in the absence of any such specific allegation in the show cause notice, the authority cannot mechanically impose penalty under Section 11AC of the Act. The provisions of Section 11AC of the Act are attracted in the event of establishing fraud, collusion or suppression of facts or made any wilful misstatement with an intent to evade payment of duty. This has not been done in the present case. Moreover, the duty itself has been remitted on 26.03.2015 even prior to issuance of show-cause notice.”

Mens Rea is Necessary Ingredient for Imposing Penalty under Rule 25 of Central Excise Rules: CESTAT

CCE-Jammu vs Khyber Industries (P) Ltd. CITATION: 2023 TAXSCAN (CESTAT) 1115 Counsel for Appellant: Shri Aneesh Deewan Counsel for Respondent: Dr. A. S. Gill

The Chandigarh Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), observed that mens rea is necessary ingredient for imposing penalty under Rule 25 of the Central Excise Rules, 2002.

A Two-Member Bench comprising SS Garg, Judicial Member and P Anjani Kumar, Technical Member observed that “We find that the revenue in the present appeal is only aggrieved by non-imposition of penalty under the above said rules. Here, we note 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.”

Act of evading Excise Duty by making Clandestine Clearances of Goods: CESTAT upholds Penalty u/r 26 of CER

M/s Mamta Steel India Pvt. Ltd vs Commissioner of Central Excise, Lucknow CITATION: 2024 TAXSCAN (CESTAT) 130 Counsel for Appellant: Shri S.P. Ojha Counsel for Respondent: Shri Sandeep Pandey

The Allahabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) upheld the penalty under Rule 26 of the Central Excise Rules, 2002 in the act of evading excuse duty by making clandestine clearances of goods.

A Single Member Bench comprising Sanjiv Srivastava, Technical Member observed that “The Appellant-II was actually involved in the act of evading the duty by making clandestine clearances of the goods for Appellant-I. The penalty imposed upon him under Rule 26 is justified and upheld.”

Penalty under Excise Act on Suppression of Facts without any Valid Provision of Law Demanding it is not Tenable: Supreme Court rules in favour of Reliance Industries

THE COMMISSIONER, CENTRAL EXCISE AND CUSTOMS AND ANOTHER vs M/S RELIANCE INDUSTRIES LTD. CITATION: 2023 TAXSCAN (SC) 190

In the significant case of Reliance Industries, the Supreme Court of India has held that penalty under the Central Excise Act, 1944 on suppression of facts without any valid provision of law demanding it is not tenable.

The two-judge bench comprising Justice Krishna Murari and Justice Bela M Trivedi dismissed the appeal filed by the Revenue on the ground that the demands are time-barred.

Illegal Manufacture and Clearance of Unmanufactured Tobacco: CESTAT upholds Penalty u/r 26 of Central Excise Rules

Shri Krishna Kumar vs Commissioner of Central Excise & Service Tax, Patna CITATION: 2023 TAXSCAN (CESTAT) 1393 Counsel for Appellant: Shri Tarun Chatterjee Counsel for Respondent: Shri S.S.Chattopadhyay

The Kolkata Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), upheld the penalty under the Rule 26 of the Central Excise Rules, 2002 and observed that illegal manufacture and clearance of unmanufactured tobacco.

A Two-Member Bench comprising R Muralidhar, Judicial Member and K Anpazhakan, Technical Member observed that “Suresh Prasad Sah, Appellant 2 has admitted that he is involved in the illegal manufacture and clearance of unmanufactured tobacco. Since he has changed his statement so many times, we observe that his statement has no evidentiary value. However, we find that there is no demand in the notice against Shri Suresh Prasad Sah.” “We observe that his involvement in the clandestine manufacture and clearance is very well established by his own admission. He is also involved in introducing a non-existence person Shri Mahesh Prasad before the Notary for executing the lease agreement. Accordingly, we hold that he is liable for penalty under section 26 of the Central Excise Rules 2002. Accordingly, we uphold the penalty imposed on Shri Suresh Prasad Sah” the Tribunal noted.

Penalty u/s 96ZP of Excise Act not justifiable when Revenue Department delayed Computation of ACP: Orissa HC

M/s. Purvi Bharat Steel Ltd vs Commissioner of Central Excise and Customs Bhubaneswar-1 & Others CITATION: 2023 TAXSCAN (HC) 159 Counsel for Appellant: Mr. Gautam Mukherji Counsel for Respondent: Mr. Choudhury Satyajit Mishra

In a recent ruling, the Orissa High Court (HC) held that the penalty under section 96ZP of the Central Excise Act was not justifiable when Revenue Department delayed the computation of the Annual Capacity of Production (ACP).

A Coram comprising Chief Justice Dr S. Muralidhar and Justice M S Raman observed that the question of sustaining the penalty imposed thereunder against the Appellant does not arise since the Supreme Court has struck down Rule 96 ZP of the Central Excise Rules. The court answered the questions in favour of the Appellant-Assessee and against the Department. Further, the Court set aside the impugned orders of the CESTAT and the corresponding orders of the First Appellate Authority and the Assessing Officer which imposed the penalty. While allowing the petition the Court ordered to refund of the amount of penalty deposited within a period of twelve weeks.Mr Gautam Mukherji appeared on behalf of the petitioner and Mr Choudhury Satyajit Mishra appeared on behalf of the respondent.

Penalty under Rule 26(1) Cenvat Credit Rules imposable when Abating on Fraudulent Availment of CENVAT Credit: CESTAT

BANAS ENTERPRISES vs C.C.E. & S.T.-DAMAN CITATION: 2023 TAXSCAN (CESTAT) 338 Counsel for Appellant: Shri S. J Vyas, Shri A. Banerjee Counsel for Respondent: Shri G. Kirupanandan

While considering a bunch of appeals, the Ahmedabad Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT)has held that the penalty under Rule 26(1) Cenvat Credit Rules is imposable when abating on fraudulent availment of CENVAT Credit.

A single-member bench comprising of Mr Ramesh Nair observed that it is a clear case of abatement in evasion of duty on the part of the appellants. From the investigations conducted, it was found that all were concerned in storing, receiving, and purchasing of the excisable/Cenvatable inputs which they knew and had reason to believe that such goods are liable for confiscation under the CenvatCredit Rules, 2004. The CESTAT held that since the appellants were concerned in the omission/commission of all such acts, they are liable for imposition of penalty under Rule 26(1) of Central Excise Rules, 2002. It was found by the CESTAT that all the appellants were indulged in abating M/s. Tarun Polymers, Daman for fraudulent availment of Cenvat credit therefore, they have made themselves liable for penalty under Rule 26(1) Cenvat credit rules 2002. The Tribunal upheld the impugned order imposing penalty under Rule 26(1) of Central Excise Rules.

Utilisation of CENVAT Credit of Excise duty of Defaulted period without any wilful avoidance: CESTAT Quashes penalty u/s 11AC of Central Excise Act

KALP CORPORATION vs C.C.E. & S.T.-AHMEDABAD-III CITATION: 2023 TAXSCAN (CESTAT) 1375 Counsel for Appellant: Shri P.P Jadeja Counsel for Respondent: Shri R.K. Agarwal

The Ahmedabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) quashed the penalty imposed under section 11AC of the Central Excise Act,1944 for utilizing the CENVAT Credit of Excise duty of defaulted period without any wilful avoidance

The Bench observed that the ingredients provided under the proviso to section 11A of the Central Excise Act for invoking suppression, fraud misdeclaration, etc. do not exist in this case, and as per Rule 8 of Central Excise Rules regarding monthly payment of duty, there is no specific provision for imposition of penalty. There was only a requirement of payment of interest in case of delay and the utilization of CENVAT credit for payment of duty during the default period, the same has been held in favor of the assessee in the Indsur Global Limited case. The two-member bench comprising Ramesh Nair (Judicial) and Raju (Technical) held that penalties under Section 11AC of the Act, Rule 25 of Central Excise Rules, and Rule 15(2) of CENVAT Credit Rules are not sustainable and liable to be deleted while allowing the appeal filed by the assessee.

No Penalty Imposed Merely because the Stock of Finished Goods Found In Factory Without Entry: CESTAT

Sharma Steel Rolling Mills vs The Commissioner, Central Excise & Central Respondent Goods & Service Tax, Jaipur CITATION: 2024 TAXSCAN (CESTAT) 163 Counsel for Appellant: Atul Agarwal Counsel for Respondent: Mahesh Bhardwaj

The New Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) has held that penalty should not be imposed merely because the stock of finished goods is found in a factory without entry.

It was found that the stock estimation had been done merely by the eye estimation method. Considering the fact that the officers of Anti-Evasion started search/investigation proceedings whichlasted for 3 hours and 45 minutes. The Counsel submitted that it was nowhere mentioned in the Panchnama as to how officers of Anti-Evasion measured the entire quantity of M.S. Ingot, M.S. Channels and M.S. Angles whose total quantity is 798.100 (MT). that excess quantity of MS Ingots and MS Angles were found which had not been entered in the statutory books, which is liable for penalty. However, other than the statement, no other corroborative evidence has been brought on record to show that there was an intent to evade. There is also no evidence brought out to establish that appellant No.1 had indulged in similar evasion earlier It was observed that the Tribunal in the case of Nilesh Steel & Alloy Private Ltd Vs Commissioner of Central Excise, observed that a penalty should not have been imposed merely because the stock offinished goods is found in the factory without entry into the production registerespecially when there is no evidence of clandestine removal. A single-member bench of Ms Hemambika R Priya, Member (Technical) set aside the impugned orderand allowed the appeal.

Relief to Indian Oil Corporation: CESTAT deletes Penalty for alleged Excise Duty

INDIAN OIL CORPORATION LTD vs C.C.E. & S.T CITATION: 2022 TAXSCAN (CESTAT) 343 Counsel for Appellant: Shri. Chandan Kumar Counsel for Respondent: Shri. P.R.V. Raman

In a significant ruling, in favour of Indian Oil Corporation, the Ahmedabad bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that in absence of violation of the rule to evade tax will not invoke penalty under Rule 173Q and quashed the penalty.

The Tribunal observed that the claim of the Applicant that exemption Notification No. 29/89C.E. applies to any mineral oil (Kerosene) falling under heading 2710 of the Schedule to the Central Excise Tariff Act 1985 is not correct. The said exemption Notification applies only to “Kerosene” and not for any other mineral oil falling under heading 2710. Further observed that it was a matter of difference of opinion regarding the classification of goods between the applicant and the department. Judicial member Mr Ramesh Nair and Technical Member Mr Raju set aside the penalty and held that “no penalty is imposable upon the appellant under Rule 173Q of the Central Excise Rules 1944 as the applicant has not violated any Rules/provisions with an intention to evade payment of duty”. Shri. Chandan Kumar appeared for the Appellant and Shri. P.R.V. Raman appeared for the Respondent.

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