2016 (12) TMI 1123 - AT - Central Excise

Demand of duty, interest and penalty - appellant did not pay the duty in terms of Rule 96ZP(3) of the Central Excise Rules, 1944 - whether the demand is sustainable when Rules were held ultra virus? - Held that - reliance placed on the decision of the case of the decision of Punjab & Haryana High Court in the case of Mittal Alloys Vs. Commissioner of Central Excise, Chandigarh 2013 (12) TMI 1241 - PUNJAB AND HARYANA HIGH COURT , wherein it was held that the omission of Rule 96ZO(3) would not affect any obligation or liability already accrued or incurred - only interest and penalty cannot be demanded however as regard the demand of duty it is legally recoverable - appeal partly allowed in favor of appellant.

Summary

Issues involved: Interpretation of Rule 96ZP(3) of the Central Excise Rules, 1944; Sustainability of demand in light of judgments on ultra vires Rules; Liability for duty, interest, and penalty.

Analysis:
1. The case involved a dispute where the appellant, a predecessor company, did not pay duty as per Rule 96ZP(3) of the Central Excise Rules, 1944, leading to the issuance of show cause notices. The demand was confirmed with interest and a penalty of ?6 lakhs imposed. The appellant appealed against the Order-in-Original, which was rejected by the Commissioner (Appeals), prompting the appeal before the Tribunal.

2. The appellant argued that judgments by the Hon'ble Gujarat High Court and the Supreme Court rendered Rules 96ZO, 96ZP, and 96ZQ ultra vires, questioning the sustainability of the demand. The Tribunal noted that the issue in those judgments pertained to penalty under the Compounded Levy Scheme, while the present case involved duty, interest, and penalty. The Supreme Court's decision highlighted that the omission of the compounded levy scheme did not absolve the duty liability for the operational period, distinguishing between duty and penalty/interest aspects.

3. The Assistant Commissioner representing the Revenue reiterated the findings of the impugned order, emphasizing the demand's validity.

4. After considering both parties' submissions and the relevant judgments, the Tribunal concluded that while interest and penalty could not be enforced due to the ultra vires Rules, the duty remained legally recoverable. Citing a judgment by the Punjab & Haryana High Court, the Tribunal maintained the duty demand but waived the penalty and interest imposed by the lower authority. The appeal was partly allowed, confirming the duty while modifying the impugned order to exclude penalty and interest.

This detailed analysis of the judgment showcases the Tribunal's thorough consideration of legal precedents, specifically addressing the sustainability of the demand concerning duty, interest, and penalty under the Central Excise Rules, 1944, in light of relevant judicial interpretations.