2016 (5) TMI 839 - AT - Central Excise

Demand of short paid duty - Unit closed from January 1998 to March 1998 - Discharged duty under Section 3A of Central Excise Act, 1944 read with Rule 96ZP of erstwhile Central Excise Rules, 1944 - Held that - since the applicant exercised their option to discharge duty under Rule 96ZP(3), therefore, the period of closure of factory/non-production in our view is immaterial. Therefore, by following the Judgment of Hon ble Supreme Court in the case of Commissioner of C.Ex. & Customs Vs. Venus Castings Pvt. Ltd. 2000 (4) TMI 37 - SUPREME COURT OF INDIA , wherein it has been laid down that the assessee when exercises option to follow either of the procedures, cannot switch over to the one, beneficial to him, in the same financial year. Therefore, the duty short paid has been rightly confirmed by the Ld. Commissioner and to this extent the order is upheld. Imposition of penalty and recovery of interest - Held that - in view of the judgment of Hon ble Supreme Court in the case of Shree Bhagwati Steel Rolling Mills Vs.CCE 2015 (11) TMI 1172 - SUPREME COURT , penalty and interest under Rule 96ZP ibid cannot be sustained. - Appeal disposed of

Summary

Issues:
- Appeal against confirmation of duty, penalty, and interest imposed by the Commissioner.
- Interpretation of Rule 96ZP of erstwhile Central Excise Rules, 1944.
- Applicability of benefits under Section 3A of Central Excise Act, 1944.
- Validity of penalty and interest under Rule 96ZP.

Analysis:

The appeal was filed against the confirmation of duty, penalty, and interest by the Commissioner. The Appellants, engaged in manufacturing various products, were issued a demand notice for alleged short payment of duty. The Commissioner confirmed the demand against one Show Cause Notice but dropped the demands raised under two other notices. The Revenue appealed against the dropping of demands, while the Appellants challenged the confirmation of duty, penalty, and interest. The Appellants argued that the duty was wrongly confirmed due to factory closure, citing relevant legal precedents. The Revenue contended that opting for lump sum duty payment under Rule 96ZP precludes availing benefits under Section 3A of the Act, supported by legal judgments.

The Tribunal noted that the Appellants had opted to pay duty on a lump sum basis under Rule 96ZP, making the period of factory closure irrelevant. Referring to legal precedents, the Tribunal emphasized that the two procedures under Section 3A(4) and Rule 96ZP(3) are alternative and cannot be combined. Once an assessee chooses a procedure, switching to another in the same financial year is not permitted. Therefore, the duty short paid was rightly confirmed by the Commissioner.

Regarding penalty and interest, the Tribunal considered the recent Supreme Court judgment declaring the provisions under Rule 96ZP invalid. Citing the specific case law, the Tribunal concluded that penalty and interest under Rule 96ZP cannot be sustained. Consequently, the Order was modified, and the appeal was disposed of accordingly. The judgment reaffirmed the principles regarding the interpretation of Rule 96ZP and the inapplicability of penalty and interest under the said rule.

In summary, the Tribunal upheld the duty confirmation due to the Appellants' choice to pay duty on a lump sum basis, as per Rule 96ZP, and invalidated the penalty and interest imposed under the same rule based on the recent Supreme Court ruling.