2013 (10) TMI 168 - HC - Central Excise

Penalty under Rule 173Q - whether wrong mentioning of provisions for invoking penalty would render the order illegal Held that - The law is well settled that if there are various sources of power to impose penalty, merely mentioning a wrong section will not make the order invalid - In case the power to levy penalty can be legitimately connected with the proper source then the authority will have the power to levy penalty. Whether the Tribunal was legally right in vacating the penalty imposed upon the Managing Director Held that - When a person was repeatedly guilty of an offence, in the case of second offence he cannot be treated so leniently that no penalty was imposed upon him - It was urged that there can be no reference on the question of imposition of penalty and only an appeal could be filed - We are not in agreement with this view - this is a fit case where the Appellate Tribunal should be directed to refer the questions of law raised in the application for decision.

Issues involved:
1. Interpretation of provisions under Central Excise Act, 1944 and Central Excise Rules, 1944 regarding imposition of penalty and interest.
2. Application of Rule 173Q for penalty imposition.
3. Reduction of penalty for repeated offenses.
4. Authority to impose penalty under Rule 209A of the Rules.

Analysis:

Issue 1:
The main issue in this case was the interpretation of provisions under the Central Excise Act, 1944 and Central Excise Rules, 1944 regarding the imposition of penalty and interest. The Tribunal vacated the demand for penalty equal to duty under Section 11AC of the Act, citing the timing of the enactment of the relevant provisions. The Court acknowledged that Sections 11AB and 11AC came into effect only from 28.9.1996 and held that no interest or penalty could have been imposed for the period prior to this date.

Issue 2:
Regarding the application of Rule 173Q for penalty imposition, the Court found that even if Sections 11AB and 11AC were not applicable, the authorities had the power to impose penalty under this Rule. The Tribunal's decision to vacate the penalty based on the absence of specific reference to Rule 173Q was deemed incorrect. The Court emphasized that mentioning a wrong section does not invalidate the penalty order if it can be connected to the proper source of power.

Issue 3:
The Court addressed the reduction of penalty for repeated offenses, specifically in the case of the Managing Director who was found to be involved in the evasion of duty. Despite acknowledging his liability for penalty under Rule 209A of the Rules, the Tribunal reduced the penalty amount based on a previous case. The Court criticized this leniency, stating that repeat offenders cannot be treated lightly, and penalties should be imposed accordingly.

Issue 4:
Lastly, the authority to impose penalty under Rule 209A of the Rules was discussed in relation to the Managing Director's involvement in the evasion of duty. The Court disagreed with the Tribunal's decision to vacate the penalty imposed on the Managing Director, emphasizing the need for consistent penalties for repeated offenses. The Court directed the Appellate Tribunal to refer specific questions of law to the High Court for further clarification and decision.

In conclusion, the judgment focused on the correct interpretation and application of provisions under the Central Excise Act, 1944 and Central Excise Rules, 1944, emphasizing the need for consistent penalties for repeated offenses and the proper exercise of authority in penalty imposition.

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