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2014 (7) TMI 922 - HC - Central ExcisePenalty for delayed payment of excise duty - delay in payment of duty is only a maximum of 8 days and the reasons for delay are either due to holding or temporary financial crisis. - compounded levy of duty on M.S. Ingots - erstwhile Rule 96ZO(3) - Held that - The authorities below had accepted the fact that there is an impossibility of compliance of payment of duty on due date on account of 15-11-1998 being a Sunday. In other wards, the authorities below had consistently found that there was imminent justifiable reason and there was a genuine cause for the respondents inability to pay the duty amount on the due date. Decision in the case of K.S. VENKATARAMAN & CO. (P) LTD. V. STATE OF MADRAS 1965 (10) TMI 11 - SUPREME Court followed - Any assessment made on the basis of such a void provision cannot be a decision under the provisions of the Act. Briefly stated, the procedural machinery under the Act can be utilized only to decide disputes that arise under the substantive provisions of the Act which are not ultra vires. - Decided against the revenue.
Issues:
1. Reduction of penalty by CESTAT contrary to Rule 96ZO 2. Discretion of CESTAT in imposing penalties 3. Lack of authoritative pronouncement on penalty imposition Issue 1: Reduction of penalty by CESTAT contrary to Rule 96ZO The case involved a manufacturer of M.S. Ingots who received a show cause notice for defaulting on duty payments. The Commissioner imposed a penalty of Rs. 4,99,666 under Rule 96ZO(3). On appeal, the penalty was reduced to Rs. 5,000 by the Commissioner, citing a previous judgment. The Department appealed to the CESTAT, which upheld the Commissioner's decision. The Department argued that penalty imposition under Rule 96ZO is mandatory, citing the Supreme Court's ruling in a similar case. The respondent's counsel contended that penalty proceedings are quasi-criminal and discretionary, pointing to conflicting judgments. The respondent highlighted that some High Courts had declared Rule 96ZO as ultra vires. The High Court noted a delay of 8 days in payment due to financial reasons and the impossibility of payment on a Sunday. Despite the mandatory nature of the penalty, the High Court considered the validity of the rule and found the demand unsustainable due to its ultra vires status. The High Court dismissed the appeal, citing the Supreme Court's precedent and subsequent developments. Issue 2: Discretion of CESTAT in imposing penalties The Department argued that penalty imposition under Rule 96ZO is mandatory, as per the Supreme Court's ruling. The respondent's counsel contended that penalty proceedings involve discretion, citing conflicting judgments and the quasi-criminal nature of penalties. The respondent acknowledged the Supreme Court's ruling but highlighted that the validity of the rule was questioned in various High Courts. The High Court considered the conflicting views on penalty imposition and the ultra vires status of Rule 96ZO. Despite the mandatory nature of the penalty, the High Court found the demand unsustainable due to the rule's invalidity. The High Court upheld the CESTAT's decision based on the legal principles established by the Supreme Court. Issue 3: Lack of authoritative pronouncement on penalty imposition The High Court noted the absence of authoritative pronouncements on penalty imposition under Rule 96ZO. The Department argued for the mandatory imposition of penalties, relying on the Supreme Court's judgment. The respondent's counsel highlighted conflicting views on penalty proceedings and the rule's validity challenges in various High Courts. The High Court considered the legal framework and the Supreme Court's ruling on penalty imposition. Despite the lack of authoritative pronouncements, the High Court applied the legal principles established by the Supreme Court and upheld the CESTAT's decision based on the rule's invalidity. The High Court dismissed the appeals, emphasizing the mandatory nature of penalties under Rule 96ZO but ultimately finding the demand unsustainable due to the rule's ultra vires status. The judgment underscores the legal complexities surrounding penalty imposition and the importance of considering the validity of rules in such cases.
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