2015 (12) TMI 736 - HC - Central Excise

Compounded levy scheme - Penalty under Rule 96ZO - violation of the provisions of erstwhile Rule 96ZO of the Central Excise Rules, 1944 - Held that - Issue raised in this appeal stands concluded by the decision of this Court in M/s Jai Bharat Maruti Ltd. v. Commissioner of Central Excise Delhi-III, Vanijya Nikunj, Udyog Vihar, Phase-Gurgaon (Haryana) 2013 (10) TMI 355 - PUNJAB & HARYANA HIGH COURT Commissioner of Central Excise, Chandigarh-II v. M/s Pee Iron & Steel Co. (P) Ltd., Derabassi 2014 (6) TMI 197 - PUNJAB AND HARYANA HIGH COURT , where following the earlier decision of this Court in Bansal Alloys and Metals Pvt. Ltd. s case (2010 (11) TMI 83 - PUNJAB & HARYANA HIGH COURT ), the appeal filed by the revenue was dismissed. This Court in Bansal Alloys & Metals Pvt. Ltd s case (supra) while deciding the question of vires of Rules 96ZO(3), 96ZP and 96ZQ of the Rules held the said provisions to the extent of providing for mandatory minimum penalty without mens rea and without any element of discretion as excessive and unreasonable restriction on fundamental rights being arbitrary and were accordingly declared to be ultra vires the Act and the Constitution - no substantial question of law arises in this appeal - Decided against Revenue.

Issues:
1. Interpretation of compounded levy scheme under the Central Excise Act.
2. Validity of penalty imposition under Rule 96ZO of the Central Excise Rules.
3. Discretion of adjudicating authority in waiving or reducing penalties.
4. Judicial review of legislation regarding penalty provisions.
5. Condonation of delay in re-filing the appeal.

Interpretation of Compounded Levy Scheme:
The appeal involved a dispute regarding the interpretation of the compounded levy scheme under the Central Excise Act. The respondent, engaged in manufacturing hot rolled products of non-alloy steel, opted for the scheme for the full and final discharge of duty liability. However, they failed to pay the duty liability in a timely manner, leading to penal actions under Rule 96ZO of the Central Excise Rules. The adjudicating authority imposed penalties equal to the outstanding duty amounts, which the respondent contested through appeals.

Validity of Penalty Imposition under Rule 96ZO:
The core issue revolved around the validity of penalty imposition under Rule 96ZO of the Central Excise Rules. The penalties were imposed on the respondent for delays in duty payments, with the amounts outstanding being substantial. The Commissioner (Appeals) and the Tribunal successively reduced the penalties imposed, leading to the current appeal by the revenue. The Tribunal's decision was based on the judgment in Bansal Alloys & Metals Pvt. Ltd. v. Union of India, which questioned the constitutionality of mandatory minimum penalties without considering the extent and circumstances of the delay.

Discretion of Adjudicating Authority in Waiving or Reducing Penalties:
The case also addressed the discretion of the adjudicating authority in waiving or reducing penalties imposed under Rule 96ZO. The Tribunal's decision was influenced by previous judgments highlighting the excessive and unreasonable nature of mandatory penalties without mens rea or discretion. The Court emphasized the need for proportionality in penalties and declared the provisions of Rules 96ZO, 96ZP, and 96ZQ as ultra vires the Act and the Constitution.

Judicial Review of Legislation Regarding Penalty Provisions:
The judgment extensively discussed the judicial review of legislation concerning penalty provisions. It cited previous decisions that struck down Rules 96ZO, 96ZP, and 96ZQ for imposing mandatory penalties equivalent to the duty amount, which was deemed arbitrary and excessive. The Court emphasized the importance of statutory authorization for penalty imposition and upheld the contention that such rules were violative of fundamental rights and ultra vires the Central Excise Act.

Condonation of Delay in Re-filing the Appeal:
Lastly, the Court addressed the delay of 414 days in re-filing the appeal and the application for condonation of the delay. Since the appeal was dismissed on merits, no further orders were required regarding the delay, leading to the dismissal of the appeal.

This detailed analysis of the judgment highlights the key issues surrounding the interpretation of the compounded levy scheme, the validity of penalty imposition, the discretion of the adjudicating authority, the judicial review of penalty provisions, and the condonation of delay in re-filing the appeal. The Court's decision was influenced by previous judgments emphasizing the need for proportionality in penalties and the importance of statutory authorization for penalty imposition, ultimately leading to the dismissal of the appeal.

← Previous Next →