Rule 27 of Central Excise Rules 2002, is generously used for penalizing technical lapses. Many subscribe to the view that when penalty is imposed under Rule 27 for say, delayed filing of Returns, the penalty is payable.
With due respect to all those who advocate this view beg to differ. Rule 27 cannot be invoked for in such cases for the simple reason that this Rule is not a standalone Rule. It is mandatory that Rule 27 is read with Rules 25 and 26. Let us see what Rule 25, 26 and 27 say.
RULE 25:
Confiscation and penalty:
(1) Subject to the provisions of section 11AC of the Act, if any producer, manufacturer, registered person of a warehouse or a registered dealer, -
(a) Removes any excisable goods in contravention of any of the provisions of these rules or the notification issued under these rules; or
(b) Does not account for any excisable goods produced or manufactured or stored by him; or
(c) Engages in the manufacture, production or storage of any excisable goods without having applied for the registration certificate required under section 6 of the Act; or
(d) Contravenes any of the provisions of these rules or the notifications issued under these rules with intent to evade payment of duty, then, all such goods shall be liable to confiscation and the producer or manufacturer or registered person of the warehouse or a registered dealer, as the case may be, shall be liable to a penalty not exceeding the duty on the excisable goods in respect of which any contravention of the nature referred to in clause (a) or clause (b) or clause (c) or clause (d) has been committed, or [rupees two thousand], whichever is greater.
(2) An order under sub-rule (1) shall be issued by the Central Excise Officer, following the principles of natural justice.
RULE 26:
Penalty for certain offences:
(1) Any person who acquires possession of, or is in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing, or in any other manner deals with, any excisable goods which he knows or has reason to believe are liable to confiscation under the Act or these rules, shall be liable to a penalty not exceeding the duty on such goods or two thousand rupees, whichever is greater.
(2) Any person, who issues -
(i) An excise duty invoice without delivery of the goods specified therein or abets in making such invoice; or
(ii) Any other document or abets in making such document, on the basis of which the user of said invoice or document is likely to take or has taken any ineligible benefit under the Act or the rules made there under like claiming of CENVAT credit under the CENVAT Credit Rules, 2004 or refund, shall be liable to a penalty not exceeding the amount of such benefit or five thousand rupees, whichever is greater.
RULE 27:
General penalty:
A breach of these rules shall, where no other penalty is provided herein or in the Act, be punishable with a penalty which may extend to five thousand rupees and with confiscation of the goods in respect of which the offence is committed.
Having gone through the above Rules, it is clear that all the three Rules above have a singular purpose of protecting Government Revenue. The message is loud and clear. Any act done in avoiding/evading Government Revenue is punishable with penalty and confiscation. Now let us turn to Rule 27.
The caption of this Rule is a bit misleading, to start with. General Penalty has in fact very limited scope and is invokable only when offences mentioned in Rule 25 and 26 are committed. The words “AND WITH CONFISCATION OF THE GOODS IN RESPECT OF WHICH THE OFFENCE IS COMMITTED deserves a closer look. These words clearly suggest that penalty is to be imposed SIMULTANEOUSLY WITH confiscation of goods. If there is no confiscation of goods, there is no question of imposing penalty under Rule 27.
Since technical lapses like delayed uploading/filing of (or the like) Returns do not result in Revenue loss, nor there is any possibility of confiscation of goods, penalty cannot be imposed in such cases under Rule 27 of Central Excise Rules 2002.
Vide Circular No. 922/12/2010-CX issued from F.No. 208/2/2009-CX-6 dated 18th May 2010 power to adjudicate is granted to Superintendents. Even here, the power is limited to cases where DUTY upto Rs. 1 lakh is involved. In case of delayed filing of Returns, obviously duty is not involved. For whatever just reasons the filing was delayed, no penalty can be imposed by invoking Rule 27 of CER, 2002.
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