2016 (11) TMI 191 - HC - Central Excise

Demand - Imposition of penalty - Compounded Levy Scheme - CTD bars, falling under Chapter heading 72 of the Central Excise Tariff Act, 1985 - Held that - The Tribunal, while directing the Commissioner to fix the ACP, has set aside the penalty also. Penalty, as such, cannot be imposed, in the light of the decision of the Hon ble Supreme Court in Shree Bhagwati Steel Rolling Mills v. Commissioner of Central Excise 2015 (11) TMI 1172 - SUPREME COURT , wherein, the issue, which came up for consideration before the Hon ble Supreme Court, was to the correctness of the judgments of High Courts, which struck down Rules 96ZO, 96 ZP and 96 ZQ of the Central Excise Rules, 1994, relating to penalty, as ultra vires of a parent Act and violative of Articles 14 and 19(1)(g) of the Constitution of India. Insofar as penalty is concerned, the Hon ble apex Court held that it is ultra vires - Appeal dismissed.

Summary

Issues:
1. Validity of demand notices based on ACP set aside by Tribunal
2. Requirement of obtaining and considering a second opinion on furnace type
3. Imposition of penalty in light of Supreme Court decision

Issue 1: Validity of demand notices based on ACP set aside by Tribunal
The case involved appeals against an order of the Customs Excise and Service Tax Appellate Tribunal, Chennai, remanding the matter to the Adjudicating Authority. The respondent, a manufacturer of CTD bars, opted for payment of duty under the Compounded Levy Scheme. The Commissioner of Central Excise fixed the ACP of the assessee, leading to show cause notices for differential duty. The Tribunal set aside the demand of duty based on the ACP communicated by the Assistant Commissioner, as it was not valid after the ACP was determined by the Commissioner. The Tribunal directed the Commissioner to determine the ACP afresh in accordance with the law.

Issue 2: Requirement of obtaining and considering a second opinion on furnace type
The Tribunal found discrepancies in the expert opinion regarding the type of furnace in the factory. The Commissioner had initially relied on a report certifying the furnace as "pusher type." However, a contradictory opinion was later provided without sufficient reasons. The Tribunal agreed that a second opinion should be obtained and considered by the Commissioner for a fresh determination of the ACP. The case was sent back to the Commissioner for reevaluation based on the new expert opinion and the changed parameters of the furnace.

Issue 3: Imposition of penalty in light of Supreme Court decision
The Tribunal set aside the penalty imposed by the Commissioner along with the demand of duty. The High Court upheld this decision based on a Supreme Court ruling declaring penalties under certain Central Excise Rules as ultra vires. The Court held that penalties could not be imposed in this case, aligning with the Supreme Court's decision. The appeals were dismissed, and no costs were awarded.

In conclusion, the High Court dismissed the Civil Miscellaneous Appeals, upholding the Tribunal's decision to set aside the demand of duty and penalty, and directing the Commissioner to determine the ACP afresh. The judgment also highlighted the importance of obtaining and considering a second expert opinion and the implications of a Supreme Court ruling on penalties under Central Excise Rules.