2013 (1) TMI 442 - AT - Central Excise

Short payment of excise duty Mandatory minimum penalty - Intention to evade duty - Compounded levy scheme u/s 3A of the Central Excise Act, 1944 - Penalty upon the respondent under Rule 96ZO(3) - Under the scheme the respondent was required to pay a sum of duty amounting to Rs. 5.50 lacs in two equal installments in a month Held that - Following the decision in case of BANSAL ALLOYS & METALS PVT. LTD. (2010 (11) TMI 83 - PUNJAB & HARYANA HIGH COURT) that the aforesaid rule to the extent of providing mandatory minimum penalty without any mens rea and without any element of discretion is excessive and unreasonable restriction on fundamental rights and is arbitrary. On the basis of overall facts and circumstances of the case which did not indicate the intention to evade payment of excise duty was justified in reducing the penalty. In favour of assessee

Summary

Issues:
1. Reduction of penalty by Commissioner (Appeals) against default in payment of excise duty.
2. Applicability and legality of Rule 96ZO and Section 3A under Central Excise Rules.
3. Challenge to the Commissioner (Appeals) decision by the revenue.

Analysis:
1. The case involved an appeal by the revenue against the order-in-appeal, where the Commissioner (Appeals) reduced the penalty imposed on the assessee for default in payment of excise duty to Rs. 25,000.

2. The respondent, engaged in manufacturing non-alloy steel ingots, was under a compounded levy scheme requiring payment of duty in two equal instalments monthly. The respondent failed to pay the full duty amounts for several months, resulting in outstanding amounts and penalties as per Rule 96ZO(3) of the Central Excise Rules.

3. The jurisdictional authority issued show cause notices for recovery of interest and penalties. The respondent appealed the order-in-original, leading to the Commissioner (Appeals) reducing the penalty to Rs. 25,000. The revenue challenged this decision, arguing that the Commissioner erred in applying certain judgments and that the penalty should be as per Rule 96ZO.

4. The tribunal noted that previous judgments did not test the validity of Rule 96ZO. A judgment from the Supreme Court highlighted that the adjudicating authority has no discretion in reducing penalties below the duty amount. However, a High Court ruling found the rule imposing mandatory minimum penalties without intent to evade duty as excessive and unreasonable.

5. Considering the High Court's stance, the tribunal upheld the Commissioner's decision to reduce the penalty to Rs. 25,000, as the case did not indicate an intention to evade duty. Therefore, the tribunal dismissed the appeal, finding no grounds for interference with the Commissioner's decision.