2006 (2) TMI 561 - AT - Central Excise

Summary

Issues:
Interpretation of penalty provision under Rule 96ZP of Central Excise Rules.

Detailed Analysis:
The appeal before the Appellate Tribunal CESTAT, CHENNAI arose from a High Court order directing the disposal of the appeal on merits. The appellants were involved in manufacturing non-alloy steel products under the compounded levy scheme of Rule 96ZP of the Central Excise Rules during the disputed period. The duty liability was based on the Annual Capacity of Production determined by the Commissioner of Central Excise. The party defaulted in duty payment, leading to a demand and proposed penalty under Rule 96ZP. A previous Tribunal order finalized the duty liability at Rs. 33,27,334, which became final as no appeal was filed against it. However, the party had not yet paid the demanded duty.

Subsequently, after the stay order expired, the penalty dispute was revived before the Tribunal. The party argued that the penalty equal to duty prescribed under Rule 96ZP was not mandatory but a maximum amount that could be imposed. They cited a Supreme Court judgment in State of Madhya Pradesh v. BHEL to support their claim for a lesser penalty. The Respondent, represented by the SDR, contended that the cited judgment was inapplicable to the present case involving interpretation of a penal provision under Central Excise Rules.

The Tribunal, in its analysis, held that the Supreme Court's judgment was relevant to penalties under Rule 96ZO(3) and Rule 96ZP(3), indicating discretion in these penal provisions. It was determined that a quasi-judicial authority could impose a penalty lower than the maximum on a defaulting assessee under the compounded levy scheme. The Tribunal found the penalty imposed by the lower authority excessive at over Rs. 33 lakhs and reduced it to Rs. 10 lakhs considering the circumstances of the case. The appeal did not involve any other issues, leading to its dismissal with the reduced penalty amount.

In conclusion, the Tribunal's decision emphasized the discretion in penal provisions under the Central Excise Rules and the applicability of relevant Supreme Court judgments in determining penalties for defaulting parties under such schemes.

(Order dictated and pronounced in open Court)