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2019 (1) TMI 709 - HC - Central Excise


Issues involved:
1. Interpretation of the effect of the omission of Section 3A of the Central Excise Act, 1944 without any saving clause on pending proceedings.
2. Validity of penalties exceeding a certain amount under Rules 96ZO, 96ZP, and 96ZQ of the Central Excise Act.

Analysis:

Issue 1:
The High Court considered the effect of the omission of Section 3A of the Central Excise Act, 1944, without any saving clause on pending proceedings. The Court referred to the ruling in the case of M/s Shree Bhagwati Steel Rolling Mill and M/s Fibre Boards (P) Ltd., Bangalore. The Court held that the omission of Section 3A did not affect proceedings already initiated. The Court emphasized that even after the omission of Section 3A, pending proceedings would remain unaffected. The Court noted that the view taken by the CESTAT was in direct conflict with the law laid down by the Apex Court, thus requiring interference. Consequently, the Excise Appeal by the appellant was allowed.

Issue 2:
Regarding the validity of penalties exceeding a certain amount under Rules 96ZO, 96ZP, and 96ZQ of the Central Excise Act, the High Court relied on the case of M/s Shree Bhagwati Steel Rolling Mill. The Court highlighted that penalties exceeding Rs. 5,000 were considered ultra vires and violative of the Constitution of India. The Court quoted the Apex Court's reasoning that penalties should be levied within the statutory limits provided by the Act. The Court concluded that penalties beyond the specified limits were arbitrary and excessive. Therefore, the Court upheld the contention that the mentioned rules imposing mandatory penalties equivalent to the duty amount were violative of the law and the Constitution. As a result, the Excise Appeal by the appellant seeking enhanced penalties was dismissed based on the binding precedent set by the Apex Court.

In the final order, the High Court dismissed Excise Appeal No. 3/2007 and partly allowed Excise Appeal No. 4/2007. The impugned order by the CESTAT was quashed to the extent it allowed the respondent's appeal, which was then restored for further consideration. All contentions, except those related to the omission of Section 3A, were left open for the CESTAT to decide. The parties were directed to bear their own costs in the present case.

 

 

 

 

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