2013 (1) TMI 303 - AT - Central Excise

Compounded Levy Scheme of Rules 96ZQ - Duty liability based on their annual production capacity - Appellant are independent processors of man-made fabrics Duty determined the production capacity length of galleries Short payment of duty - There was delay of 15 days, 11 days and 9 days in discharge of monthly duty liability by due date for the months April, 1999, May, 1999 and June, 1999 - Rule 96ZQ(5)(ii) provided for imposition of penalty for failure to discharge duty liability by due date Held that - As decided in case of BANSAL ALLOYS & METALS PVT. LTD. (2010 (11) TMI 83 - PUNJAB & HARYANA HIGH COURT) that rule providing for penalty equal to the monthly duty liability for delay in discharge of monthly duty liability by due date has been held to be ultra vires There is no mandatory penalty equal to the outstanding duty liability at the end of the month even for smallest delay in discharge of duty liability by the due date; some penalty commensurate with gravity of the contravention can be imposed by the adjudicating authority. Penalty on the appellant is reduced to ₹ 5 lakhs. Partly allowed in favour of assessee

Summary

Issues:
1. Dispute regarding central excise duty liability under Compounded Levy Scheme.
2. Imposition of penalty and interest for non-payment of duty by due date.

Analysis:
1. The appellant, an independent processor of man-made fabrics, was under the Compounded Levy Scheme from 1-4-1999 to 30-6-1999. The Commissioner determined their monthly duty liability based on their production capacity, considering the length of galleries. Due to non-payment of full duty liability during April to June 1999, a show cause notice was issued for recovery of short-paid duty and penalty. The Joint Commissioner confirmed the duty demand and imposed a penalty under Rule 96ZQ(5). The Tribunal remanded the matter for reevaluation based on a previous judgment excluding the length of galleries from production capacity calculation. The duty demand was dropped in the reevaluation as per the Apex Court's decision, but interest and penalty were maintained.

2. The Additional Commissioner upheld the interest and penalty imposed by the Joint Commissioner. The appellant contended that there was no short payment of duty, thus no justification for penalty. They argued that the penalty amount was excessive for a minor delay in payment. Citing various legal precedents, the appellant challenged the imposition of a penalty equal to the duty liability. The Departmental Representative defended the penalty citing a Supreme Court judgment.

3. The Tribunal acknowledged the delay in duty payment by the appellant for the months in question. While Rule 96ZQ(5)(ii) prescribed a penalty equal to the outstanding duty liability for such delays, recent High Court judgments deemed this provision ultra vires. The Tribunal noted that while some penalty was warranted for the delay, the imposed penalty was excessive. Consequently, the penalty was reduced to Rs. 5 lakhs, and the interest for the delay was upheld. The Commissioner (Appeals)'s order was modified accordingly.