2005 (1) TMI 510 - AT - Central Excise

Summary

Issues:
1. Contesting correctness of order-in-appeal setting aside penalty and interest under Rule 96-ZP(3)(i)(ii) of Central Excise Rules and Rule 173Q.

Analysis:
The appeal before the Appellate Tribunal CESTAT, New Delhi involved the Revenue contesting the correctness of the impugned order-in-appeal where the Commissioner (Appeals) had set aside the penalty and interest imposed under Rule 96-ZP(3)(i)(ii) of the Central Excise Rules and Rule 173Q. Despite the absence of the respondents during the hearing, the Tribunal proceeded to decide the appeal after hearing the learned Judicial Departmental Representative (JDR). Upon reviewing the file and the impugned order, it was found that the respondents were engaged in the manufacture of Hot Re-rolling Products and were liable to pay duty under Section 3A of the Central Excise Act under the Compounded Levy Scheme. The respondents had failed to pay the duty for the relevant period, leading to the imposition of liability for payment of interest and penalty under Rule 96-ZP(3)(i)(ii) of the Central Excise Rules. The Tribunal noted that the imposition of penalty under the said Rule was mandatory, with the quantum of penalty being discretionary. Therefore, the Commissioner (Appeals) erred in setting aside the penalty entirely and dropping the demand for interest, especially considering that the duty was paid before the issuance of the show cause notice. Consequently, the Tribunal modified the impugned order by imposing a penalty of Rs. 25,000 on the respondents and directing them to pay the interest as per the law.

This judgment highlights the importance of complying with duty payment obligations under the Central Excise Rules and the consequences of failing to do so, including the imposition of penalties and interest. It underscores the discretionary nature of penalty imposition while emphasizing the mandatory requirement to pay interest in such cases. The decision serves as a reminder to taxpayers regarding the consequences of non-compliance with tax regulations and the authority's power to enforce penalties and interest payments to ensure compliance with the law.