2003 (12) TMI 482 - AT - Central Excise

Summary

Issues:
1. Reduction of mandatory penalty imposed by the lower appellate authority.
2. Interpretation of Rule 96ZQ regarding penalty for delay in payment of duty.
3. Comparison with similar judgments by the Hon'ble Supreme Court and the Tribunal.

Issue 1: Reduction of mandatory penalty imposed by the lower appellate authority

The judgment addresses the appeal against the reduction of a mandatory penalty of Rs. 4,07,254/- imposed by the adjudicating authority due to a delay in payment of duty under the compounded levy scheme for a period of two days. The learned SDR representing the department argued that the penalty was reduced to Rs. 50,000/- by the Commissioner (Appeal), which was still considered excessively high given the circumstances. The tribunal found that the penalty reduction was justified, considering that the delay was minimal, and any benefit from the delayed payment was neutralized by charging interest. The tribunal opined that even the reduced penalty amount of Rs. 50,000/- seemed disproportionately high in this case.

Issue 2: Interpretation of Rule 96ZQ regarding penalty for delay in payment of duty

The department contended that the penalty under Rule 96ZQ is mandatory. However, the tribunal analyzed Rule 96ZQ(5), which stipulates that an independent processor failing to pay duty by a specified date shall be liable to pay the outstanding amount along with interest and a penalty equal to the duty amount or Rs. 5,000/-, whichever is greater. The tribunal clarified that the rule does not mandate the penalty to be equal to the duty amount, but rather imposes a penal liability up to a limit equal to the duty amount. Therefore, the penalty imposed should be within that limit but need not always equal the duty amount. The tribunal rejected the argument that the penalty must be equal to the duty amount, emphasizing the penal liability aspect outlined in Rule 96ZQ.

Issue 3: Comparison with similar judgments by the Hon'ble Supreme Court and the Tribunal

The tribunal referred to previous judgments by the Hon'ble Supreme Court and the Tribunal in cases like State of Madhya Pradesh v. Bharat Heavy Electricals, Escorts JCB Ltd. v. CCE, New Delhi, and Hindustan Wires Ltd. v. CCE, Delhi. These judgments supported the interpretation that the penalty imposed does not necessarily have to equal the duty amount but should be within the limit set by the rule. The tribunal found no merit in the department's appeal seeking a penalty equal to the duty amount for a two-day delay in payment, ultimately rejecting the appeal.

This comprehensive analysis of the judgment highlights the issues of penalty reduction, interpretation of Rule 96ZQ, and the alignment with previous judicial interpretations, providing a detailed overview of the tribunal's decision in the case.