2009 (10) TMI 944 - AT - Central Excise

Summary

Issues Involved:
Challenge to the levy of penalty under Rule 96ZO of the Central Excise Rules, 1944 for default in payment of duty prior to May 1998.

Detailed Analysis:

Issue 1: Retrospective Application of Penalty Provision
The main issue in this case revolved around the retrospective application of the penalty provision under sub-rule (3) of Rule 96ZO of the Central Excise Rules, 1944. The appellant contended that since the dispute related to a period before May 1998 and the penal provision came into force on May 1, 1998, the penalty could not be applied retrospectively. The Tribunal referred to a previous decision in M/s. Mittal Alloys v. CCE, Ludhiana, where it was held that such penal provisions are not retrospective. The appellant argued that based on this ruling, the penalty should be set aside. However, the respondent highlighted that the Tribunal's decision did not completely align with the Supreme Court's ruling in the case of Union of India v. Dharamendra Textile Processors. The Tribunal analyzed the arguments and emphasized that the penal provision was introduced through an amendment effective from May 1, 1998, and the appellant should have had the opportunity to defend against it before facing penalties.

Issue 2: Imposition of Penalty
The Tribunal delved into the specifics of the penalty imposition in this case. The appellant had pursued an abatement claim under sub-rule (2) of Rule 96ZO, indicating efforts to address the duty payment issue. However, the appellant faced penalties equivalent to the amount of duty defaulted. The Tribunal noted that the authorities did not consider all aspects, such as production stoppages and disturbances, before imposing penalties. The respondent argued that once a default was found, penalties were mandatory as per the statute, citing the Supreme Court's ruling in Dharamendra Textile Processors. However, the Tribunal stressed the importance of giving the appellant a fair opportunity to defend against the penalty provision, especially considering the timing of the amendment and the lack of prior application of the amended provision in this case.

Conclusion
After thorough analysis, the Tribunal concluded that the penalty imposition under Rule 96ZO(3) was not justified in this case due to the retrospective application issue and lack of opportunity for the appellant to defend against the amended provision. Consequently, the impugned order imposing penalties was set aside, and the appeals were allowed in favor of the appellants.