2011 (4) TMI 896 - AT - Central Excise

Short payment of duty on account of adjustment of abatement - penalty - Held that - In the absence of any justifiable cause being shown mere pendency of abatement claim cannot be a ground to avoid the payment of the duty. Certainly if the assessee had succeeded in abatement claim, he could have sought refund of the amount, but pendency of the abatement claim by itself cannot be a ground to delay the payment of duty. Once it is clear that assessee was not given any opportunity to meet the case regarding the penalty in terms of the proviso in question, the department cannot insist for 100% penalty upon the appellants in terms of the said proviso, merely on the basis of the said provision of law which came into force subsequent to the issuance of show cause notice - thus penalty imposed in relation to the delay in payment of sum of Rs. 1,35,349/- is reduced to Rs. 20,000/-, therefore assessee would be liable to pay the duty to the tune of Rs. 1,35,349/- alongwith the interest thereon and penalty of Rs. 20,000/- besides amount of Rs. 12,500/- with interest thereon and penalty of equal amount - partly in favour of assessee.

Summary

Issues involved:
- Imposition of penalty for non-payment of excise duty
- Interpretation of Rule 96 ZO (3) of the Central Excise Rules, 1944
- Application of penalty provisions introduced w.e.f. 1st May 1998
- Justifiability of penalty for delayed payment
- Assessment of penalty amount
- Relevant case law references

Issue 1: Imposition of penalty for non-payment of excise duty

The appellants, engaged in manufacturing non-alloy steel ingots, opted for a duty discharge scheme but failed to pay excise duty for certain periods. Show cause notices were issued, and after adjudication, demands for unpaid duty along with penalties were confirmed. The appellants contended that penalty imposition was unjustified due to difficulties faced in running the manufacturing process. The Commissioner (Appeals) rejected this argument, leading to the present appeals.

Issue 2: Interpretation of Rule 96 ZO (3) of the Central Excise Rules, 1944

The appellants argued that the penalty provision under Rule 96 ZO (3) was introduced from 1st May 1998, and thus, penalties for the period before that date were not justified. The Department, however, asserted that penalties applied even for periods prior to the amendment date. The Tribunal examined the provisions and relevant case law to determine the applicability of penalties under Rule 96 ZO (3).

Issue 3: Application of penalty provisions introduced w.e.f. 1st May 1998

The Tribunal analyzed the proviso added to Rule 96 ZO (3) regarding penalties for non-payment of duty by a specified date. The discussion revolved around the retrospective or prospective application of the penalty provisions and whether penalties could be imposed for periods preceding the amendment date. Case law references and legislative intent were crucial in determining the correct application of penalty provisions.

Issue 4: Justifiability of penalty for delayed payment

The Tribunal considered whether the penalties imposed were justifiable in light of the circumstances, including factory closure beyond the appellants' control. The assessment focused on the reasons for non-payment, the applicability of penalty clauses, and the adequacy of explanations provided by the appellants. The decision balanced the need for penalty imposition with the challenges faced by the appellants.

Issue 5: Assessment of penalty amount

After thorough deliberation, the Tribunal reduced the penalty amount from the original imposition. Factors such as the quantum of unpaid duty, the period of default, and the circumstances surrounding the delay in payment were taken into account in determining the appropriate penalty. The decision aimed to strike a balance between enforcing compliance and considering the appellants' situation.

Issue 6: Relevant case law references

The Tribunal referenced various case laws, such as Jaininder Steel Pvt. Ltd. and Mittal Alloys, to support its interpretation and decision-making process. These cases provided insights into penalty provisions, retrospective application of laws, and the principles governing penalty imposition in excise duty matters. The Tribunal's analysis of these precedents helped in arriving at a well-reasoned judgment.

In conclusion, the Tribunal partially allowed the appeal by reducing the penalty imposed for delayed payment of excise duty. The decision provided a detailed analysis of penalty provisions, case law references, and the specific circumstances of the case to arrive at a fair and just outcome.