2005 (11) TMI 392 - AT - Central Excise

Summary

Issues:
1. Applicability of penalties for default in payment of excise duty under Compounded Levy Scheme.
2. Claim of factory closure as a defense against penalty imposition.
3. Interpretation of legal plea regarding the deletion of Section 3A from the statute book.

Analysis:
1. The appellants, engaged in manufacturing Alloy Steel products under the Compounded Levy Scheme, defaulted in paying excise duty for the period Nov.'98 to Mar.'99. Despite remitting the duty with interest upon detection, show-cause notices were issued seeking penalties. The original authority imposed penalties equal to the duty amounts, which were reduced by the first appellate authority to Rs. 10,000/- and Rs. 5,000/- for different periods. The appellants contested the penalties, claiming they shut down their factory on 14-10-1998 and were not liable for duty from that date. However, the authority rejected this defense, holding the appellants liable for the penalties based on the default in monthly duty payments under Rule 96ZP(3) of the Central Excise Rules, 1944.

2. The appellants failed to apply for abatement of duty during the factory closure period, leading to the rejection of the duty demand avoidance based on closure. The legal plea raised by the appellants contended that they were not liable to pay excise duty post the deletion of Section 3A from the statute book effective 11-5-2001. The tribunal found this argument illogical as Section 3A was applicable during the dispute period. As the appellants operated under Section 3A without claiming abatement, they were obligated to discharge duty as per the Annual Capacity of Production (ACP) determined by the Commissioner, even though the payment was made belatedly and without protest. The key issue was whether penal liability existed for the default in monthly duty payments under the mandatory Rule 96ZP(3), which the lower appellate authority addressed by substantially reducing the penalties in a fair manner, affirming the impugned order.

3. The tribunal affirmed the lower appellate authority's decision, dismissing the appeals and upholding the reduced penalties. The judgment emphasized the mandatory nature of Rule 96ZP(3) and the appellants' obligation to pay duty under Section 3A during the material period, rejecting the arguments related to factory closure and the deletion of Section 3A from the statute book as grounds for penalty avoidance.