2017 (5) TMI 693 - AT - Central Excise

Production capacity based duty - benefit of Rule 96ZP(3) - applicability of proviso to sub Section (3) or sub-section (4) of Section 3A - Held that - Hon ble High Court in the case of MALVIYA STEEL LTD. Versus COMMISSIONER OF CENTRAL EXCISE, JAIPUR 2002 (2) TMI 252 - CEGAT, NEW DELHI , while dealing with the identical issue has held that in case of manufacturer opts for Rule 96ZP(3) benefit under the proviso to sub-section (3) or sub-section (4) of Section 3A of the Central Excise Act, 1944 cannot be availed - an appellant availing the benefit of Rule 96ZP(3) cannot avail benefit of proviso to sub Section (3) or sub-section (4) of Section 3A - demand upheld. Penalty u/r 96ZP(3)(ii) - Held that - reliance was placed in the case of M/s. Shree Bhagwati Steel Rolling Mills Versus Commissioner of Central Excise & Another 2015 (11) TMI 1172 - SUPREME COURT , where it was held that imposition of a mandatory penalty equal to the amount of duty not being by statute would itself make rules 96ZO, 96 ZP and 96 ZQ without authority of law - penalty set aside. Appeal allowed - decided partly in favor of appellant.

Summary

Issues:
Demand of duty for a period when the unit was closed, Penalty imposed under Rule 96ZP(3)(ii), Benefit of proviso to sub-section (3) and (4) of Section 3A of Central Excise Act, 1944.

Analysis:
1. Demand of Duty for Closed Period:
The appellants, rerolling mills under the compounded levy scheme, were asked to pay duty for a period when the unit was closed. The appellants argued that no duty can be demanded during the closure period as there was no production. They had notified the closure and reopening of the unit. The Tribunal referred to various cases like Hamdum Iron & Steel Enterprises Ltd., Digamber Foundry, Malviya Steel Ltd., and Sanjay Alloys Pvt. Ltd. to support the appellants' argument. The Tribunal held that the benefit of abatement from duty for the closure period is available to the appellants under Section 3A(2), allowing the appeal and setting aside the Commissioner's order.

2. Penalty Imposed under Rule 96ZP(3)(ii):
Regarding the penalty imposed under Rule 96ZP(3)(ii), the appellants relied on the decision of the Hon'ble Apex Court in Shree Bhagwati Steel Rolling Mills. The Hon'ble Apex Court had concluded that the interest and penalty provisions under the Central Excise Rules are invalid. Thus, the Tribunal set aside the penalty imposed, following the Apex Court's decision.

3. Benefit of Proviso to Sub-section (3) and (4) of Section 3A:
The Assistant Revenue relied on the decision of the Hon'ble High Court of Bombay in the case of Rajuri Steels Pvt. Ltd. to argue that the benefit of the proviso to sub-section (3) and (4) of Section 3A is not available if the manufacturer has opted for the payment scheme under Rule 96ZP(3). The High Court held that an appellant availing the benefit of Rule 96ZP(3) cannot avail the benefit of the proviso to sub-section (3) or sub-section (4) of Section 3A, thereby supporting the Revenue's position.

4. Conclusion:
While upholding the demand of duty for the closed period, the Tribunal set aside the penalty imposed under Rule 96ZP(3)(ii) based on the Apex Court's decision. The appeal was partly allowed, with the demand of duty upheld and the penalty imposed being set aside.

This detailed analysis outlines the key arguments, legal precedents, and decisions made by the Tribunal in addressing the issues related to the demand of duty for a closed period, penalty imposition, and the benefit of proviso to sub-section (3) and (4) of the Central Excise Act, 1944.