2006 (3) TMI 570 - AT - Central Excise

Summary

Issues:
Reduction of penalty by Commissioner (Appeals) from amount equivalent to duty to Rs. 5,000 in violation of Rule 96ZP(3).

Analysis:
The appeal before the Appellate Tribunal CESTAT, Mumbai involved the issue of penalty reduction by the Commissioner (Appeals) from an amount equivalent to duty to Rs. 5,000, which was deemed to be against the provisions of Rule 96ZP(3). The learned SDR argued that Rule 96ZP(3) mandates the penalty to be either equivalent to the outstanding duty or Rs. 5,000, whichever is greater. The SDR referred to the proviso 4 of Rule 96ZP(3) which clearly outlined the penalty provisions for failure to pay duty by a specified date. The SDR contended that the penalty reduction by the Commissioner (Appeals) was incorrect and cited a decision by the Hon'ble Allahabad High Court in a similar case to support this argument.

The SDR emphasized that the decision of the Hon'ble Allahabad High Court took precedence over the Tribunal's decision relied upon by the Commissioner (Appeals). The SDR highlighted that the Allahabad High Court had clarified that the penalty under the 4th proviso of Rule 96ZP(3) was not a maximum penalty but the only penalty applicable for non-payment of duty by the due date. The SDR argued that the Tribunal had been overly lenient in reducing the penalty, which was not within their jurisdiction. As the respondents did not appear despite notice, the Tribunal considered the arguments presented by the SDR.

The Tribunal, after considering the submissions made by the SDR and the precedence set by the Allahabad High Court, concluded that the penalty reduction by the Commissioner (Appeals) was unjustified. The Tribunal agreed with the interpretation that the penalty under the 4th proviso of Rule 96ZP(3) was not a maximum penalty but the penalty equivalent to the unpaid duty. Therefore, the Tribunal set aside the order-in-appeal passed by the Commissioner (Appeals) and reinstated the order-in-original passed by the Deputy Commissioner.

In summary, the Appellate Tribunal CESTAT, Mumbai ruled in favor of upholding the penalty provisions under Rule 96ZP(3) and reinstated the original penalty amount as per the statutory requirements, following the interpretation provided by the Hon'ble Allahabad High Court.