2015 (1) TMI 542 - AT - Central Excise

Imposition of penalty - determination of annual capacity of production - Held that - Provisions of Rule 96(ZP) of the said Compounded Levy Rules were omitted from this Statute Books with effect from 01.03.2001 and Section 3 A of the Act was omitted w.e.f. 11.05.2001, without any saving clause. The Hon ble Gujarat High Court in the case of Krishna Processors vs. Union of India reported in 2012 (11) TMI 954 - GUJARAT HIGH COURT has held that after the omission of the said Rules, proceedings cannot be continued under the omitted Rules inasmuch as there was no saving clause. In a recent decision, the Tribunal in the case of Shri Surinder Steel Rolling Mill vide 2014 (7) TMI 699 - CESTAT NEW DELHI , has taken note of the said decision of the Hon ble Gujarat High Court in the case of Krishna Processors, as also other decisions of the Hon ble Supreme Court, and has come to a finding that the adjudication order passed subsequent to 01.03.2001, even where the proceedings were initiated prior to the said date, cannot be sustained. Provisions of Rule 96 (ZP), of the Annual Capacity Determination Rules have been held to be ultra vires by the Hon ble High Court of Punjab and Haryana in the case of Bansal Alloys and Metals Pvt. Ltd. vs. Union of India reported in 2010 (11) TMI 83 - PUNJAB & HARYANA HIGH COURT as also by the Hon ble High Court of Himachal Pradesh in the case of Shubh Timb Steel Ltd. Vs. Union of India reported in 2012 (9) TMI 458 - HIMACHAL PRADESH HIGH COURT As such, no penalty can be imposed under the said Rules. Otherwise also we find that the original dispute related to Annual Determination of Annual Production Capacity which culminated against the assessees by the order of the Hon ble Supreme Court. In between, the Tribunals orders as also of the Hon ble High Courts orders were in favour of the assessees. The said fact reflects that this is a case of bonafide interpretation of the provisions of law and the element of any malafide is missing, in which case imposition of penalty cannot be called for. Imposition of interest Held that - as per the declaration of law by the Hon ble Delhi High Court in the case of Hindustan Insecticides Ltd. vs. Commissioner of Central Excise LTU, 2013 (8) TMI 225 - DELHI HIGH COURT , the Revenue is expected to issue show cause notice within the period of limitation, prescribed under the provisions of Section 11A of the Central Excise Act. The interest does not arise as an automatic appendix to the duty demand. Inasmuch as in the present case, neither show cause notice nor the demand for interest has been made within the limitation period, we find no justification for confirmation of interest. Decided in favour of assesse.

Summary

Issues:
1. Interpretation of Rule 5 of Hot Rerolling Steel Mill Annual Capacity Determination Rules 1997.
2. Imposition of penalties under Rule 96 ZP and confirmation of interest.
3. Appealability of orders communicated by Assistant Commissioner on behalf of Commissioner.
4. Legality of interest and penalty proceedings initiated after the omission of relevant rules.
5. Validity of penalties under Rule 96(ZP) of the Annual Capacity Determination Rules.

Analysis:

1. The appeals involved a dispute regarding the determination of annual production capacity for re-rolling product manufacturers. The issue centered around the application of Rule 5 of the Hot Rerolling Steel Mill Annual Capacity Determination Rules 1997 after a subsequent reduction in production capacity due to parameter changes. The Tribunal's decision, based on the Sawanmal Shibumal case, set aside the lower authority's order and remanded the matter for fresh consideration by the Commissioner.

2. Following the Tribunal's decision, the Revenue appealed to the High Court of Punjab and Haryana, which rejected the appeal. However, the Revenue then approached the Supreme Court, which overturned the Tribunal's decision, making the appellants liable to pay differential duties. The present appeals dealt with the imposition of penalties under Rule 96 ZP and the confirmation of interest, challenging the Commissioner's orders.

3. The issue of appealability arose concerning orders communicated by the Assistant Commissioner on behalf of the Commissioner. The Tribunal clarified that such orders, even if communicated by the Assistant Commissioner, are appealable before the Tribunal based on legal precedents.

4. The legality of interest and penalty proceedings initiated after the omission of relevant rules was questioned. The Tribunal noted that the provisions of Rule 96(ZP) were omitted without a saving clause, following the decision in the Krishna Processors case. Applying this ruling, the Tribunal found that proceedings initiated after the omission of rules could not be sustained.

5. Lastly, the Tribunal addressed the validity of penalties under Rule 96(ZP) of the Annual Capacity Determination Rules. Citing previous High Court decisions, the Tribunal held that no penalty could be imposed under these rules. Moreover, considering the bona fide interpretation of the law and absence of malafide intent, the Tribunal ruled in favor of the assessees, allowing their appeals and rejecting the Revenue's appeal.

This detailed analysis covers the various legal issues addressed in the judgment, providing a comprehensive overview of the case and its implications.