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2014 (1) TMI 1212 - HC - Central ExcisePenalty u/s 11AC - Mandatory or directory - Held that - penalty provision under section 11AC and also Rule 96-ZQ and 96ZO of Central Excise Rules,1944 as to whether the penalty provision is mandatory or discretionary, rejecting the plea that Rules 96ZQ and 96ZO have a concept of discretion inbuilt - reference was made for determination as to whether Section 11AC of the Central Excise Act, 1944 inserted by the Finance Act, 1996 with the intention of imposing mandatory penalty on persons who evaded payment of tax should be read to contain mens rea as an essential ingredient and whether there is scope of levying penalty below the prescribed minimum - Observing that the levy of penalty is a mandatory penalty and there is no scope for any discretion and rejecting the plea that Rules 96ZQ and 96ZO have a concept of discretion in-built - The matter is remitted to CEGAT for reconsidering the matter afresh in the light of the law laid down by the Hon ble Supreme Court in the case of Dharamendra Textile Processors & Ors. reported in (2007 (7) TMI 307 - SUPREME COURT OF INDIA) and further clarified in the case of Union of India Vs. Rajasthan Spinning & Weaving Mills reported in (2009 (5) TMI 15 - SUPREME COURT OF INDIA) - Decided in favour of Revenue.
Issues:
1. Reduction of penalty amount by CEGAT. 2. Interpretation of Rule 96ZO of Central Excise Rules. 3. Applicability of mandatory penalty provisions. 4. Review of penalty reduction based on subsequent Supreme Court decisions. Issue 1: Reduction of penalty amount by CEGAT The case involved an appeal against the Customs, Excise & Gold (Control) Appellate Tribunal (CEGAT) order reducing the penalty amount imposed under Rule 96ZO(3) from Rs.83,87,000 to Rs.40,00,000. The Tribunal considered the appellant's financial difficulties and partial payment, leading to the reduction in penalty amount. However, the appeal was filed by the Revenue against this reduction. Issue 2: Interpretation of Rule 96ZO of Central Excise Rules The respondent-assessee was involved in manufacturing M.S Ingot/Billets and was required to pay duty based on the Annual Capacity of Production (ACP) as per Rule 96ZO of Central Excise Rules. The dispute arose when the assessee paid less duty than required, leading to show cause notices for duty short paid, penalty, and interest issuance by the Commissioner. Issue 3: Applicability of mandatory penalty provisions The case referred to the mandatory penalty provision under Rule 96ZO of Central Excise Rules. The Hon'ble Supreme Court's analysis in the case of Dharamendra Textile Processors & Ors. clarified that the penalty provisions were mandatory, with no discretion for authorities to reduce penalties below the prescribed minimum. The Court emphasized that the penalty must be imposed equal to the determined duty amount. Issue 4: Review of penalty reduction based on subsequent Supreme Court decisions Following subsequent Supreme Court decisions, the Court set aside the CEGAT's order reducing the penalty and remitted the matter for reconsideration. The Court directed CEGAT to review the case in light of the legal principles established in the Dharamendra Textile Processors & Ors. case and the Union of India Vs. Rajasthan Spinning & Weaving Mills case. The decision aimed to ensure compliance with the mandatory penalty provisions and emphasized the authority's lack of discretion in quantifying penalties under Rule 96ZO. This detailed analysis highlights the key legal issues, interpretations of relevant rules, and the impact of Supreme Court decisions on the penalty reduction in the case.
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