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2013 (6) TMI 61 - HC - Central ExciseLevy of penalty in erstwhile Rule 96ZQ of Central Excise Rules, 1944? - Compounded levy of duty - production capacity - held that - Tribunal wrongly relied on the ratio of Beauty Dyers v. Union of India (2001 (12) TMI 94 - HIGH COURT OF JUDICATURE AT MADRAS) decided by the Madras High Court. The question whether the penalty can be levied and whether there is any discretion in levy of penalty, stand covered by the judgment of this Court in Commissioner of Customs & Central Excise v. M/s Majestic Auto Ltd. (2013 (3) TMI 338 - ALLAHABAD HIGH COURT). - The authorities have no discretion in fixing the quantum of penalty and penalty equal to the duty must be imposed once section 11Ac is made applicable. - Decided in favor of revenue.
Issues:
- Interpretation of Rule 96ZQ of the Central Excise Rules, 1944 regarding penalty imposition. - Applicability of the decision in Beauty Dyers v. Union of India by the Madras High Court. - Discretion of the Tribunal in reducing penalties under Rule 96ZQ. - Comparison with similar provisions in Rule 96ZP and Section 11AC. Analysis: The central issue in this case revolves around the interpretation of Rule 96ZQ of the Central Excise Rules, 1944 concerning the imposition of penalties. The respondent company, engaged in fabric processing, was found to have defaulted in paying excise duty for the period April 1999 to February 2001, leading to a penalty of Rs. 45,00,000. The Commissioner of Central Excise confirmed this penalty, which was subsequently set aside by the Commissioner (A) and upheld by the Tribunal, citing the decision in Beauty Dyers v. Union of India by the Madras High Court. The appellant argued that the Tribunal erred in reducing the penalty, emphasizing that the Central Government has the authority to determine annual production capacity under Section 3A(2) of the Central Excise Act, 1944. The appellant contended that the penalty was mandatory under Rule 96ZQ and should not have been reduced based on financial hardships cited by the respondent. The appellant further relied on a previous judgment related to Rule 96ZP, asserting that penalties mentioned in such rules are not discretionary but must be levied when duty payment defaults occur. Additionally, reference was made to a Division Bench decision emphasizing the mandatory nature of penalties under Section 11AC, indicating that adjudicating authorities or Tribunals do not have the discretion to impose different penalty amounts. In contrast, the respondent defended the Tribunal's decision, highlighting the Madras High Court's stance that penalties under Rule 96ZQ should be considered as maximum amounts, with assessing authorities having the discretion to levy lesser penalties based on individual case circumstances. The respondent also argued that discretion in penalty imposition was discussed in previous cases, emphasizing that various degrees of culpability should be considered. Ultimately, the High Court allowed the central excise appeal, setting aside the Tribunal's decision and reinstating the penalty imposed on the respondent. The Court determined that the Tribunal had wrongly relied on the Beauty Dyers case and clarified that penalties under Rule 96ZQ are not discretionary, aligning with the interpretation in previous judgments related to similar provisions.
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