2007 (5) TMI 156 - AT - Central Excise

Penalty on short payment of duty Short payment was result of dispute regarding fixation of annual capacity of production Since the final determination was done in Jan. 2001 and differential duty was paid in 2000 so penalty not imposable

Summary

Issues:
Capacity determination under compounded levy scheme, Shortage in duty payment, Imposition of interest and penalty, Interpretation of proviso to Rule 96ZP(3), Appeal against penalty imposition.

Capacity Determination under Compounded Levy Scheme:
The respondent was operating under a compounded levy scheme based on the Annual Capacity of production of their steel mill. Orders passed by the Commissioner regarding capacity determination were challenged before the Tribunal and eventually settled by an order dated 2nd January 2001. There was a shortage in duty payment for the period April 1998 to September 1998, resulting in a confirmed duty liability of around Rs. 1.3 lacs along with imposed interest and penalty equivalent to the duty short paid.

Shortage in Duty Payment and Penalty Imposition:
The Commissioner (Appeals) noted that the short payment arose due to a dispute regarding the capacity of production. It was observed that as per the proviso to Rule 96ZP(3), the final determination of capacity should lead to the payment of any differential duty by the 10th of the month following the final decision. Since the final determination occurred in January 2001, and the differential duty had been paid in 2000, the penalty was set aside by the Commissioner.

Interpretation of Proviso to Rule 96ZP(3):
The appeal by the revenue against the Commissioner's order argued that since there was a difference between the initial and final capacity determination, there was a short payment warranting penalty imposition. However, the respondent contended that the assessment was provisional due to the capacity dispute, invoking the proviso to Rule 96ZP(3) as supported by a previous Tribunal order. The Tribunal upheld the respondent's position, emphasizing that no penalty is attracted in cases where payments were provisional due to capacity disputes.

Appeal Against Penalty Imposition:
The Tribunal found that the respondent's case aligned with the previous Tribunal order, emphasizing that the short payment stemmed from a capacity dispute and the payments were provisional. Consequently, the appeal by the revenue was deemed to lack merit and was rejected. The Tribunal's decision was pronounced in the open court, affirming the rejection of the appeal against the penalty imposition.