2014 (4) TMI 913 - HC - Central Excise

Duty demand - Option given under Rule 96ZO(3) - whether the Assessing Authority can exercise the discretion to levy the lesser amount of penalty than the amount provided under Rule 96 ZO(3) - Held that - The validity of Rule 96 ZO is not under consideration before us. The default is also not in dispute. Admittedly, the appellant has not deposited the amount within the specified period and has deposited the amount along with the interest beyond the specified period, therefore, the appellant is liable for the penalty under Rule 96 ZO(3). The Assistant Commissioner has levied the penalty at Rs.20,000/-. - wherein it has been held that Rule 96(ZO(3) provides the levy of equal amount of penalty to the duty short paid/unpaid and authority has no discretion to impose the penalty lower than the amount of duty involved - Decided against assessee.

Summary

Issues:
- Imposition of penalty equal to the amount of short paid duty under Rule 96 ZO of Central Excise Rules.
- Discretion of the Adjudicating Authority to impose a penalty lower than the amount of duty involved under Rule 96 ZO(3).

Analysis:
1. Imposition of Penalty Equal to Short Paid Duty:
The case involves an appeal against the Tribunal's order imposing a penalty equal to the amount of short paid duty under Rule 96 ZO of Central Excise Rules. The appellant, engaged in manufacturing M.S. Ingots, failed to deposit duty of Rs.2,66,667 within the specified period. Despite subsequently depositing the amount along with interest, the Assistant Commissioner confirmed the demand and imposed a penalty of Rs.20,000. The Commissioner(Appeals) later increased the penalty to Rs.2,66,667, which was further enhanced by the Tribunal to the extent of the short paid duty. The Tribunal relied on the Supreme Court's decision in Union of India Vs. Dharmendra Textiles Processors, emphasizing that Rule 96 ZO(3) mandates a penalty equal to the duty short paid or not paid. The Tribunal's decision aligns with the legal precedent, upholding the strict application of penalties in such cases.

2. Discretion of Adjudicating Authority for Penalty Amount:
The core issue revolves around whether the Adjudicating Authority has the discretion to impose a penalty lower than the amount specified under Rule 96 ZO(3). The appellant argued for leniency based on the circumstances of the case and cited a High Court ruling declaring Rule 96 ZO ultra vires. However, the respondent contended that the Assistant Commissioner correctly applied the penalty as per the rule's provision and referenced legal precedents, including the Dharmendra Textiles Processors case. The High Court concurred with the respondent, emphasizing that the Authority cannot exercise discretion to levy a penalty lower than the duty amount, as mandated by Rule 96 ZO(3). The court upheld the Tribunal's decision to enhance the penalty to match the short paid duty, citing consistent judicial interpretations supporting this strict approach.

In conclusion, the High Court dismissed the appeal, affirming the Tribunal's decision to increase the penalty to match the short paid duty amount. The judgment underscores the strict application of penalties under Rule 96 ZO of Central Excise Rules, in line with established legal precedents and the Supreme Court's interpretation in similar cases.