2016 (4) TMI 840 - HC - Central Excise

Penalty - whether there is no provision for penalty under the Automobile Cess Rules, 1984 which were enacted under Section 30 of the Industries (Development and Regulation) Act, 1951, the Penalty imposed under Section 173(Q) of the Central Excise Rules, 1944 is not leviable for the periods for which the penalty is imposed, i.e. from December, 1998 to December, 2001? - Held that - Looking to Rule 3 of the Automobile Cess Rules, 1984, there is no provision for penalty at all envisaged under this Rule and as stated herein above, penalty partakes the character of additional tax, looking to the Article 265 of the Constitution of India, no tax can be levied or collected except authority of the law. Such authority has to be specific and explicit in the Acts or the Rules. The Automobile Cess Rules creates liability for the payment of automobile cess, but, it creates no liability for any penalty and hence any penalty cannot be levied under Section 173 (Q) of the The Central Excise Act, 1944.

Summary

Issues Involved:
1. Imposition of penalty under Rule 173(Q) of the Central Excise Rules, 1944 for non-payment of Automobile Cess.
2. Applicability of Rule 3 of the Automobile Cess Rules, 1984.
3. Interpretation of relevant legal provisions and precedents.

Issue-wise Detailed Analysis:

1. Imposition of Penalty under Rule 173(Q) of the Central Excise Rules, 1944:
The appellant imposed a penalty on the respondent under Rule 173(Q) of the Central Excise Rules, 1944 for non-payment of Automobile Cess from December 1998 to December 2001. The respondent argued that there is no provision for penalty under the Automobile Cess Rules, 1984 or the Industries (Development and Regulation) Act, 1951. The CESTAT, Kolkata, set aside the penalty, stating that penalty cannot be imposed without a specific provision. The court upheld this view, referencing the Supreme Court's decision in Khemka & Co., which emphasized that penalty is distinct from tax and requires explicit statutory authority.

2. Applicability of Rule 3 of the Automobile Cess Rules, 1984:
The appellant contended that Rule 3 of the Automobile Cess Rules, 1984, which applies the provisions of the Central Excise Act and Rules to the levy and collection of Automobile Cess, also implicitly allows for the imposition of penalties. The respondent argued that Rule 3 only pertains to procedural aspects and does not authorize penalties. The court agreed with the respondent, citing the Supreme Court's decision in Orient Fabrics (P.) Ltd., which held that procedural provisions do not extend to penalties without explicit statutory authority.

3. Interpretation of Relevant Legal Provisions and Precedents:
The court examined Rule 3 of the Automobile Cess Rules, 1984, Section 11AA of the Central Excise Act, 1944, and Rule 173(Q) of the Central Excise Rules, 1944. It concluded that Rule 3 does not provide for penalties and that penalties require specific statutory provisions. The court referenced multiple precedents, including Khemka & Co. and Hindustan Steel Ltd. v. State of Orissa, to emphasize that penalties are an additional statutory liability and cannot be inferred from procedural rules.

Conclusion:
The court dismissed the appeals, affirming the CESTAT, Kolkata's decision to set aside the penalty imposed on the respondent. The judgment underscores the necessity for explicit statutory authority to impose penalties and clarifies that procedural provisions cannot be extended to include penalties without specific legislative backing.