Intention to Evade Payment of Excise duty not Established: CESTAT quashes Penalty u/r 25 of Central Excise Rules [Read Order]

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.

The Commissioner of Central Excise, Jammu & Kashmir vide Order confirmed the recovery of the amounts demanded along with interest; however, Commissioner has refrained from imposing penalty under Rule 25 & Rule 27 of the Central Excise Rules, 2002. Revenue is in appeal against the non-imposition of penalty.

Nikhil Kumar Singh, assisted by Aneesh Dewan, Authorized Representatives for the Department, reiterates the grounds of appeal and submits that the appellants have taken self-credit and refund in a fraudulent manner and therefore, are liable to pay back the refund amount along with interest and also are liable to penal action. They relied in the case of Dilip Kumar and submitted that exemption notifications should be construed strictly.

None appeared for the respondents. Notices sent to the respondents were returned by Postal Authorities with the remarks that “Addressee not traced”.

Among the four sub-clauses which enumerate the contraventions, under Rule 25 (1), which would render the goods liable for confiscation and the persons liable for penalty, only sub-clause (d) of Rule 25 is closest to the facts of the instant case .It is not the case of the Department also that sub-clauses (a) (b) & (c) are applicable; the same are not even alleged in the show-cause notice; there is not even a whisper in the show-cause notice about manufacture, production, storage, removal of goods in contravention of the provisions of the Act or the Rules made thereunder.

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.”

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