2010 (9) TMI 408 - AT - Central Excise

Delay in payment of duty Compounded levy scheme merely because there was delay in clearing the cheques on account of completion of banking procedure, that would not affect date of payment of duty by an assessee if assessee is able to show that the cheques were presented to the bankers, duly empowered to collect the duty, within the time stipulated under the statute - delay in clearing such cheques on account of banking procedure would not render the assessee to be liable either for payment of interest or penalty Penalty as far as period prior to January, 2000 is concerned, there was no delay in tendering the duty. However, from January to March, 2000 there was delay in tendering the duty. Show cause notice was issued on 16th August, 2004. Obviously, it was within the period of five years. Being so, the decision of the Punjab & Haryana High Court in the matter of Bhawani Castings (P) Ltd. (2010 -TMI - 77052 - PUNJAB & HARYANA HIGH COURT) cannot be of any help to the respondents to contend that the Department was not entitled to initiate action for imposition of penalty. In relation to the period from January to March, 2000 there was default in payment of duty amounting to Rs. 15 lacs. Obviously, therefore, the penalty imposable was only to the tune of Rs. 15 lacs and in that regard the authorities below had no discretion.

Summary

Issues:
1. Challenge to penalty imposition based on statutory provisions and case laws.
2. Delay in tendering duty payment and its impact on penalty imposition.
3. Interpretation of statutory provisions regarding penalty imposition.
4. Statutory limitation period for initiating penalty proceedings.

Issue 1: Challenge to Penalty Imposition Based on Statutory Provisions and Case Laws:
The case involved two appeals challenging penalty imposition orders by the Commissioner (Appeals) in relation to duty liability and interest. The challenge was primarily based on the decision in Union of India v. Dharamendra Textile Processors, emphasizing the lack of discretion in imposing penalties under specific rules and acts. The Department argued that penal provisions could be invoked without an outer limit, while the assessee contended that delay in payment was due to banking procedures and not wilful default. Reference was made to various tribunal and court decisions supporting both positions.

Issue 2: Delay in Tendering Duty Payment and Its Impact on Penalty Imposition:
The respondents, manufacturers of non-alloy steel ingots, opted for a Compounded Levy Scheme for duty payment. The duty was to be paid fortnightly, and while there were delays in clearing cheques for duty amounts from January to March 2000, the duty was tendered within the statutory period. The Tribunal held that delays due to banking procedures did not constitute default by the assessee, especially when cheques were presented on time to authorized entities for duty collection.

Issue 3: Interpretation of Statutory Provisions Regarding Penalty Imposition:
The Tribunal analyzed the statutory provisions and case laws to determine the correct interpretation regarding penalty imposition. It was established that for the period from January to March 2000, where there was a default in duty payment, the penalty was limited to the outstanding duty amount. The Tribunal emphasized that there was no discretion in imposing penalties under the relevant rules, making penalty imposition mandatory in such cases.

Issue 4: Statutory Limitation Period for Initiating Penalty Proceedings:
The case also addressed the statutory limitation period for initiating penalty proceedings. While there was no delay in tendering duty before January 2000, the delay in the subsequent period led to penalty imposition. The Tribunal clarified that the show cause notice issued within five years from the default date was valid, rejecting the argument that the Department was not entitled to initiate penalty action due to delay. The decision in Union of India v. Dharamendra Textile Processors reinforced the mandatory nature of penalty imposition in cases of default.

In conclusion, the appeals were allowed, quashing the impugned orders and confirming the penalty imposition to the extent of the outstanding duty amount. The Tribunal upheld the statutory provisions and case law interpretations regarding penalty imposition, emphasizing the mandatory nature of penalties in cases of default.