2009 (4) TMI 527 - HC - Central Excise

Whether the Tribunal is right in reducing the penalty when there is a provision under Rule 57-I(4) of the Rules and Section 11AC of Central Excise Act, 1944 to impose a penalty equal to the amount evaded/disallowed and also when the 1st respondent evaded duty by willfully suppressing the facts and the evasion was unearthed by the Revenue in surprise checks Held that - where the outer limit of penalty is fixed, which indicates the scope of discretion, Rules 57-I provides for imposition of a penalty equal to the credit so dissolved and therefore, as regards the imposition of penalty under Rule 57-I in a sum of Rs. 1,64,687/- could not have been reduced. Whereas, since the discretion is vested with the authority to reduce the penalty under Section 173Q, that is not interfered with. The civil miscellaneous appeal is allowed

Summary

Issues:
Reduction of penalty by the Tribunal under Rule 173Q of Central Excise Rules, 1944 when there is a provision for mandatory penalty under Rule 57-I and Section 11AC of Central Excise Act, 1944.

Analysis:
The main issue in this case revolves around the reduction of penalty by the Tribunal from Rs. 1,64,687/- to Rs. 16,000/- under Rule 173Q of Central Excise Rules, 1944. The question of law framed for consideration was whether the Tribunal was correct in reducing the penalty when there is a provision under Rule 57-I(4) of the Rules and Section 11AC of the Central Excise Act, 1944 to impose a penalty equal to the amount evaded or disallowed. It was contended that the first respondent had willfully suppressed facts and evaded duty, which was discovered during surprise checks by the Revenue.

The Court heard arguments from Mr. Arun Kumar, Senior Central Government Standing Counsel for the Department, as the first respondent did not appear through counsel. The issue raised in the appeal was found to be directly covered by a recent decision of the Honorable Apex Court in Union of India and Others v. Dharamendra Textile Processors and Others. The Tribunal, in this case, had reduced the penalty despite the respondent company accepting the removal of inputs without expunging the credit, which led to the imposition of a monetary penalty under Rule 173Q.

The Honorable Apex Court's decision emphasized that the language employed in a statute is crucial in determining legislative intent. The Rule in question provided for a mandatory penalty equivalent to the amount of duty without any discretion vested with the authority. The order-in-original confirmed various demands and penalties, including a penalty under Rule 173Q of the Central Excise Rules, 1994, on the respondent company.

The Court further highlighted that while Rule 173Q provides for discretion in determining the quantum of penalty, Rule 57-I mandates a penalty equal to the credit dissolved. Therefore, the penalty imposed under Rule 57-I could not have been reduced, unlike the penalty under Section 173Q, where discretion is allowed. As a result, the civil miscellaneous appeal was allowed to the extent indicated, upholding the mandatory penalty under Rule 57-I and the reduction under Section 173Q.