2015 (5) TMI 133 - AT - Central Excise

Compounded levy scheme - Rule 96 ZO (3) of Central Excise Rules, 1944 - Re-determination of duty liability - Short payment of duty - Tribunal reduced the imposed penalty - Held that - Departmental officers came to know about short payment in course of scrutiny of the RT-12 returns for the relevant period. From this it is clear that the fact of payment of duty on actual production basis during the period from December 1999 to March 2000 had been disclosed by the appellant in their RT-12 returns. In view of this, the Departments plea that short payment was deliberate with malafide intention is incorrect. Moreover, we find that the penalty in this case equal to the duty demand confirmed has been imposed under the proviso to Rule 96 ZO (3) according to which penalty equal to duty payable is imposable when the duty in respect of a month not paid by the due date or is short paid, but this penal provision has been held to be unconstitutional by the judgment of Honble Punjab & Haryana High Court in the case of Bansal Alloys and Metals Pvt. Ltd. vs. Union of India (2010 (11) TMI 83 - PUNJAB & HARYANA HIGH COURT). - Decied against assessee.

Issues Involved:
- Dispute regarding Central Excise duty liability under compounded levy scheme
- Validity of demand for differential duty amount
- Imposition of penalty under Rule 96 ZO (3)
- Appeal against Tribunal's order regarding confirmation of duty demand and penalty reduction
- Legal interpretation of penalty provisions under Rule 96 ZO (3)

Analysis:
1. Dispute regarding Central Excise duty liability under compounded levy scheme:
The case involved a dispute regarding the Central Excise duty liability of a company manufacturing mild steel ingots under a compounded levy scheme. The appellant had initially opted for the compounded levy scheme, but later requested re-determination of duty liability based on actual production. The Department contended that since the appellant had not withdrawn their option for the compounded levy scheme, they were liable to pay duty under that scheme. This issue led to a demand for a differential duty amount for a specific period.

2. Validity of demand for differential duty amount:
The Department issued a show cause notice demanding a differential duty amount from the appellant for the period in question. The Commissioner confirmed the duty demand along with interest and imposed a penalty equal to the duty demand under Rule 96 ZO (3) of the Central Excise Rules. The Commissioner rejected the appellant's argument that the demand was time-barred, emphasizing that no time limit was prescribed for such demands under the relevant rule.

3. Imposition of penalty under Rule 96 ZO (3):
The appellant challenged the penalty imposed by the Commissioner, arguing that the provision for a mandatory penalty under Rule 96 ZO (3) was ultra vires the Act and the Constitution. The Tribunal initially upheld the duty demand but reduced the penalty. The appellant's appeal to the High Court resulted in a remand to the Tribunal for further consideration of the duty liability issue for the relevant financial year.

4. Appeal against Tribunal's order and legal interpretation of penalty provisions:
Both the appellant company and the Department filed appeals to the High Court against the Tribunal's order. The High Court remanded the matter back to the Tribunal for fresh consideration. The Tribunal later confirmed its earlier order regarding duty demand but did not address the penalty reduction issue remanded by the High Court at that time. The Tribunal's subsequent hearing focused on the penalty reduction matter.

5. Legal interpretation of penalty provisions under Rule 96 ZO (3):
During the hearing, the appellant argued that the penalty provision under Rule 96 ZO (3) was unconstitutional, citing a judgment by the Punjab & Haryana High Court. The Tribunal considered the submissions from both sides and found that the penalty equal to the duty demand confirmed was imposed under a provision that had been held unconstitutional. Consequently, the Tribunal upheld the reduction of the penalty amount from the initial demand to a significantly lower sum.

In conclusion, the judgment addressed various legal issues related to Central Excise duty liability, demand for differential duty amounts, penalty imposition under Rule 96 ZO (3), and the interpretation of penalty provisions in light of constitutional validity. The Tribunal's decision to reduce the penalty amount was based on the legal principles established through relevant case law and constitutional considerations.

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