2010 (11) TMI 227 - HC - Central Excise

Penalty - Annual Capacity of Production - Rule 5 of the Hot Re-rolling Steel Mills Annual Capacity Determination Rules 1997 -In accordance with Section 3 of the Act declaration was filed by the assessee and Annual Capacity Production (ACP) of the assessee was determined provisionally. On that basis annual duty liability of the assessee was worked out. However the assessee did not pay the entire amount due and show cause notice for taking appropriate action for default was duly issued and thereafter order-in-original dated 1.12.1999 was passed. On appeal against duty liabilities the assessee succeeded - It was found that the duty already paid was in excess of the duty due - Accordingly excess amount was refunded to it - The Tribunal held that the assessee having paid duty in terms of ACP finally determined there was no default and no ground for levy of penalty was made out.

Summary

Issues:
1. Duty liability determination based on actual production vs. annual capacity of production.
2. Payment of duty based on self-determined annual capacity of production.
3. Duty payment during litigation/appeal.
4. Nature of penalty imposed on manufacturers for non-payment of duty.

Analysis:
1. The appeal was filed by the revenue against an order of the Customs, Excise & Service Tax Appellate Tribunal regarding duty liability determination. The substantial questions of law raised included whether the respondent was bound to discharge its duty liability based on the actual production or the annual capacity of production of its mill for the financial year 1996-97 as per the Hot Re-rolling Steel Mills Annual Capacity Determination Rules, 1997. The Tribunal found that the duty paid by the assessee was in accordance with the Annual Capacity Production (ACP) order and there was no contravention of the rules. Consequently, the penalty imposed on the manufacturer was set aside.

2. The second issue pertained to whether the respondent could pay lesser duty based on self-determination of the annual capacity of production, even if it was less than the actual production for the financial year 1996-97. The Tribunal's finding that the duty was paid as per the ACP order and the subsequent refund of the excess amount supported the assessee's position that there was no default in duty payment.

3. The third issue raised was whether the manufacturer was obligated to pay duty during the pendency of litigation or appeal. The Tribunal's decision, based on the appellant's compliance with the ACP order and subsequent duty payment, led to the setting aside of the penalty. This indicated that the duty payment during litigation/appeal was not mandatory if the duty was paid in accordance with the final ACP determination.

4. The final issue addressed the nature of the penalty imposed under Rule 96ZP(3) on manufacturers who failed to pay the full amount of duty by the specified date. The Tribunal's decision to set aside the penalty highlighted that the penalty was discretionary rather than mandatory, especially when the duty payment was made in line with the final ACP order. The High Court, based on the Tribunal's findings, dismissed the appeal, emphasizing that no substantial question of law arose due to the assessee meeting its duty liability without default.