2004 (8) TMI 444 - AT - Central Excise

Summary

Issues:
1. Imposition of penalty without issuing a show cause notice.
2. Applicability of Rule 96ZP of the Central Excise Rules, 1944.
3. Necessity of a show cause notice for imposing penalty.
4. Detention of goods for non-payment of duty.

Detailed Analysis:
1. The appeal was filed by the Revenue against an Order-in-Appeal regarding the non-payment of duty amounting to Rs. 3,90,150/- and penalty of Rs. 11,10,374/- by the respondents, a manufacturing company. The Revenue argued that the penalty was mandatory under Rule 96ZP(3) of the Central Excise Rules, 1944, and a show cause notice was not required for its imposition. The Commissioner (Appeals) had allowed the appeal of the respondents, stating that a show cause notice must precede the imposition of penalty.

2. The learned Advocate for the respondents contended that the duty liability had been paid along with interest, and referenced a previous case where no show cause notice was issued before ordering detention of goods for penalty payment. The Tribunal considered both arguments and noted that while the duty was paid late, no show cause notice had been issued for the penalty. The Tribunal also highlighted that the Compounded Levy Scheme had been withdrawn, rendering Rule 96ZP inapplicable in this case.

3. The Tribunal emphasized the importance of natural justice, stating that the imposition of a penalty requires giving the party an opportunity to be heard. It was reiterated that the Larger Bench had not ruled out the necessity of a show cause notice for demanding duty or imposing penalties. The Tribunal further clarified that the detention of goods for penalty recovery without issuing a show cause notice was not permissible.

4. Ultimately, the Tribunal found no fault in the Order-in-Appeal and rejected the appeal filed by the Revenue. It was noted that the penalty amount exceeded the unpaid duty, raising questions about its calculation. The judgment upheld the requirement of issuing a show cause notice before imposing penalties and highlighted the need for procedural fairness in such matters.