2016 (4) TMI 104 - AT - Central Excise

Penalty under the provisions of Rule 96ZQ(5)(ii) of Central Excise Rules, 1944 - non payment of Central Excise duty as determined under annual capacity of production - Held that - We find that the issue is no more res integra as Hon ble High Court of Gujarat in the case of Krishna Processors vs. Union of India 2012 (2012 (11) TMI 954 - GUJARAT HIGH COURT ) struck down the provisions of Rule 96ZQ as ultra vires. Hon ble High Court of Bombay in the case of Commissioner of Central Excise vs. Valson Dyeing Bleaching & Printing Works (2010 (9) TMI 338 - BOMBAY HIGH COURT ) has also held that once a particular rule is struck down as ultra vires nothing survives. Finally, Hon ble Supreme Court in the case of Commissioner of Central Excise vs. Angadpal Industrial Pvt. Ltd. 2015 (10) TMI 1844 - SUPREME COURT has clearly held that vires of Rule 96ZQ was contested and if upheld nothing survives in the matter. - Decided against revenue

Summary

Issues:
Revenue's appeal against penalties imposed under Rule 96ZQ(5)(ii) of Central Excise Rules, 1944.

Analysis:
The Revenue contended that penalties imposed on the respondent were set aside erroneously by the first appellate authority under Rule 96ZQ(5)(ii) of the Central Excise Rules. However, the issue is settled as the High Court of Gujarat in the case of Krishna Processors vs. Union of India declared Rule 96ZQ as ultra vires. The court highlighted that penalties can be imposed without wilful concealment and that penalties are a civil liability for loss of revenue. The court emphasized that Rule 96ZQ applies uniformly to specific categories like independent textile processors, ensuring no discrimination. The compensatory aspect of imposing interest for delayed payment does not negate penalty imposition. The court upheld the validity of Section 3A of the Act, emphasizing its unique scheme for duty collection based on annual production capacity.

The Tribunal noted similar judgments by the High Courts of Madras and Bombay, reinforcing the non-imposability of penalties under Rule 96ZQ. The Supreme Court's decision in the case of Commissioner of Central Excise vs. Angadpal Industrial Pvt. Ltd. further supported the contestation of Rule 96ZQ's vires. Consequently, the Tribunal upheld the impugned order, rejecting the Revenue's appeals against the penalties imposed. The judgment concluded that penalties under Rule 96ZQ were not sustainable due to the rule being declared ultra vires, thus affirming the legality of the impugned order.