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2015 (9) TMI 464 - HC - Central ExciseLevy of penalty - quantum of penalty - intention to evade payment of duty - Rule 96ZP (3) of the Central Excise Rules, 1944 - Held that - From perusal of the show cause notices we find that there is no allegation of intention to evade payment of duty by the respondent. The only allegation is of late payment of central excise duty. In the order in original the adjudicating authority recorded a finding of fact that the interest on late payment of duty has already been deposited by the respondent-assessee along with duty much before issuance of the show cause notice. - However The adjudicating authority imposed the penalty. Commissioner (Appeals) Customs and Central Excise, Meerut-I reduced the penalty - The Tribunal by the impugned order has increased the penalty to ₹ 3 lacs observing that the penalty confirmed by the Commissioner (Appeals) is too low. Under the circumstances, penalty under Rule 96ZP(3) of the Rules was not imposable on the respondent-assessee. However, since the respondent-assessee has not challenged the impugned order of the Tribunal and, therefore, penalty as levied by the Tribunal cannot be interfered. - Decided against the assessee.
Issues Involved:
1. Whether the penalty equal to the amount of duty under Rule 96ZP (3) of the Central Excise Rules, 1944 is leviable on the respondent. 2. Whether the omission of Rule 96ZP (3) in 2001 affects the penalty proceedings initiated before its omission. 3. Whether the provisions of Rule 96ZP (3) are ultra vires the Act and the Constitution. Issue-Wise Detailed Analysis: 1. Penalty Under Rule 96ZP (3): The primary issue was whether the penalty equal to the amount of duty under Rule 96ZP (3) of the Central Excise Rules, 1944 is mandatory. The appellant argued that the penalty is mandatory as per the Supreme Court decisions in Commissioner of Customs and Excise Vs. Kannapiran Steel Re-Rolling Mills and Commissioner of Central Excise, Mumbai. The respondent contended that since Rule 96ZP (3) was omitted without a saving clause, the penalty could not be imposed. Additionally, they argued that the penalty provisions were declared ultra vires by different High Courts, and no intention to evade duty was established. The court held that Rule 96ZP (3) must be read harmoniously with Section 37 (4) of the Central Excise Act, which requires an intention to evade payment of duty for penalty imposition. Since there was no allegation or finding of intent to evade duty, and the respondent had paid the duty along with interest before the show cause notice, the penalty was not justified. 2. Omission of Rule 96ZP (3): The appellant argued that the omission of Rule 96ZP (3) in 2001 did not affect proceedings initiated before its omission, citing Section 38A of the Central Excise Act. The respondent countered that the omission without a saving clause invalidated the penalty order passed in 2003. The court agreed with the appellant, referencing a Full Bench decision in Simbhauli Sugar Mill Ltd. Vs. Union of India, which held that proceedings initiated under an omitted rule are saved by Section 38A. Thus, the penalty proceedings did not lapse due to the omission of Rule 96ZP (3). 3. Ultra Vires Provisions: The respondent cited various High Court judgments declaring Rule 96ZP (3) ultra vires, including Bansal Alloys & Metals Pvt. Ltd. Vs. Union of India, Commissioner of Customs and Central Excise, Hyderabad v. Sunder Ispat, and Krishna Processor v. Union of India. These judgments held that the penalty provisions exceeded the rule-making power conferred under Section 37 (3) of the Act. The court concurred with these judgments, acknowledging that Rule 96ZP (3) prescribing penalties exceeding Rs. 5,000 was beyond the authority of law. Therefore, the penalty provisions were ultra vires the Act and the Constitution. Conclusion: The court concluded that the penalty under Rule 96ZP (3) was not imposable on the respondent due to the lack of intent to evade duty and the ultra vires nature of the rule. However, since the respondent did not challenge the Tribunal's order, the penalty as levied by the Tribunal could not be interfered with. The appeal was dismissed, and the question of law was answered in favor of the respondent-assessee.
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