2005 (8) TMI 22 - AT - Central Excise

Appeal to Appellate Tribunal - Limitation - Condonation of delay- A letter were issued for determation of production capacity- Appellant sought order from Commissioner but not issued-Application for condonation of delay allowed

Summary

Issues Involved:
1. Non-challenge to the letter determining capacity.
2. Determination of "annual capacity" under Rule 96ZO(3).
3. Continuation of proceedings under Rule 96ZO(3) post-omission of Section 3A.
4. Validity of interest provisions under Rule 96ZO(3).
5. Validity of penalty provisions under Rule 96ZO(3).

Detailed Analysis:

1. Non-challenge to the letter determining capacity:
The tribunal found that the non-challenge to the letter dated 3-11-99 determining capacity is not fatal to the appeal. It is well settled that such a letter is not an appealable order. Appeals against such letters are not maintainable, and appellants should seek an appealable speaking order from the Commissioner. The tribunal granted the condonation of delay in this case, allowing the application.

2. Determination of "annual capacity" under Rule 96ZO(3):
The tribunal upheld the plea that the determination of "annual capacity" is redundant under Rule 96ZO(3). The demand in the present case was raised under Rule 96ZO(3), which stipulates a lump sum amount per month based on the capacity of the "installed" furnace, not the "annual capacity of production." Therefore, the non-challenge to the letter dated 3-11-1999 is not fatal since the demand was not raised under Rule 96ZO(1).

3. Continuation of proceedings under Rule 96ZO(3) post-omission of Section 3A:
The tribunal held that the omission of Section 3A by the Finance Act, 2001, without a saving clause, means that pending proceedings cannot be continued. The tribunal cited Supreme Court judgments in Rayala Corporation and Kolhapur Canesugar Works, which held that Section 6 of the General Clauses Act, 1897 does not apply to omissions. The tribunal concluded that the subordinate legislation (Rule 96ZO and the 1997 Rules) ceases to have legal validity once the parent provision (Section 3A) is omitted. Consequently, the Order-in-Original was set aside in its entirety.

4. Validity of interest provisions under Rule 96ZO(3):
The tribunal upheld the plea that the interest provision in Rule 96ZO(3) is ultra vires. Interest on delayed payment of tax can only be levied if the statute makes a substantive provision for it. Section 37(1) of the Central Excise Act, 1944, which is a general rule-making power, cannot support the interest clause in Rule 96ZO(3). The tribunal found no provision in the Act empowering delegated legislation to levy interest under Rule 96ZO(3), rendering the interest provision ultra vires.

5. Validity of penalty provisions under Rule 96ZO(3):
The tribunal found that penalty is a substantive fiscal liability that can only be legislated by Parliament or State Legislature. There is no provision in the Central Excise Act enabling the rule-making authority to frame rules for imposing penalties under Section 3A. The tribunal cited the Orissa High Court decision in Gaffar Kasam and other judgments, concluding that the rule-making authority has no jurisdiction to create a penal liability unless expressly authorized by the statute. The tribunal held that the penalty provisions in Rule 96ZO(3) are ultra vires and struck them down.

Conclusion:
The tribunal concluded that the amounts determined on the appellant cannot be upheld for recovery. Appeal No. E/3461/03 was allowed, and Appeal No. E/252/05 was disposed of as infructuous. The proceedings under Rule 96ZO(3) were struck down as ultra vires.