2011 (7) TMI 683 - AT - Central Excise

Demand - Compounded Levy Scheme of Rule 96ZQ of the Central Excise Rules 1944 - Notification No. 42/98-C.E (N.T) dated 10.12.1998 - High Court of Punjab & Haryana is also relevant and the same is Bansal Alloys and Metals Pvt Ltd (2010 -TMI - 202136 - PUNJAB & HARYANA HIGH COURT) wherein the penal provisions of Rules 96 ZO 96 ZP and 96ZQ were held to be ultra vires the Central Excise Act - the payment of duty by both the assessees with or without interest under Rule 96ZQ is a fait accompli and that none of them claims refund thereof. - Decided in favor of the assessee

Summary

Issues:
1. Challenge against demand of duty, interest, and penalty by M/s Atul Synthetics Processors (P) Ltd.
2. Challenge against penalties by M/s Sunil Industries Ltd.
3. Grievance of short-demand of duty by the learned Commissioner (Appeals).
4. Applicability of Section 3A of the Central Excise Act.

Analysis:

Issue 1:
The appeal by M/s Atul Synthetics Processors (P) Ltd contests the demand of duty, interest, and penalty. They were engaged in processing textile fabrics under the Compounded Levy Scheme. The duty liability was not fully discharged, leading to a show-cause notice for recovery of differential duty, interest, and penalty under Rule 96ZQ. The learned Commissioner confirmed the demand and imposed penalties under Rule 96ZQ (5), which is challenged in the appeal.

Issue 2:
M/s Sunil Industries Ltd, also engaged in textile processing, challenge only the penalties imposed on them under Rule 96ZQ. They do not dispute their duty liability but contest the penalties. The determination of their Annual Capacity of Production (ACP) by the Commissioner is crucial in this context.

Issue 3:
The appeals filed by the department revolve around the grievance that the learned Commissioner (Appeals) short-demanded duty from the assessee. The basic dispute in all cases centers on the applicability of Section 3A of the Central Excise Act. The judgment cites the relevance of the Hon'ble Madras High Court's decision in Beauty Dyers vs. Union of India and subsequent follow-up by the Hon'ble High Court of Bombay.

Issue 4:
The judgment extensively discusses the applicability of Section 3A and the Annual Capacity Determination Rules under the Compounded Levy Scheme. Citing the Beauty Dyers case, the Hon'ble High Court of Madras held certain rules to be ultra vires Section 3A. The judgment also refers to decisions by the Hon'ble Bombay High Court and the Hon'ble High Court of Punjab & Haryana, which support the appeals filed against penalties imposed under Rule 96ZQ.

In conclusion, the appeals filed by the assessees are allowed, while those filed by the Revenue are dismissed. The judgment clarifies the implications of the rulings on duty demands, penalties, and the validity of the Annual Capacity Determination Rules under the Compounded Levy Scheme.