2018 (9) TMI 567 - HC - Central Excise

Levy of penalty - effect of amendment - Whether Section 11AC of the Central Excise Act is prospective; if so, whether the matter should be remitted to the Tribunal for applying the judgment of the Apex Court in Union of India v. Dharmendra Textile Processors and Ors., 2008 (9) TMI 52 - SUPREME COURT to the facts of the present case? Held that - The contention that in the present case as the notice period is 1-4-1994 to 16-1-1997, the provisions of Section 11AC of the Act cannot be invoked as the same would tantamount to retrospective effect of the provisions. In our considered opinion, it is not a correct interpretation. In respect of discovery of the fact on misrepresentation to evade the duty, it is the law which is prevalent on the date when such an act is discovered would be applicable. The contentions when examined in the context of the present fact situation wherein the period includes the period when section 11AC of the Act come into existence, deserves to be rejected. A default, which is a continuing default and not a default once for all, can be dealt with under the provision of new enactment, if it continues when the new enactment came into force, although it commenced when the old enactment was in force. The substantial question as to whether Section 11AC of the Central Excise Act is prospective; if so, whether the matter should be remitted to the Tribunal for applying the judgment of the Apex Court in Union of India v. Dharmendra Textile Processors and Ors., to the facts of the present case, is answered in negative. Appeal dismissed.

Summary

Issues Involved:
Interpretation of Section 11AC of the Central Excise Act - Prospective or Retrospective Application

Detailed Analysis:

Issue 1: Interpretation of Section 11AC of the Central Excise Act

The case involved a substantial question of law regarding the prospective or retrospective application of Section 11AC of the Central Excise Act. The appellant-assessee received a notice under Section 11AC for non-disclosure of manufacturing activities to avail SSI exemption. The notice period was from 1-4-1994 to 16-1-1997, covering a time when Section 11AC was in effect. The key contention was whether the provisions of Section 11AC could be applied retrospectively in this case. The court referred to precedents like Commissioner of Central Excise, Coimbatore v. ELGI Equipments Ltd. and Commissioner of C. Ex., Mumbai-I v. Lal Mininig Engg. Works, establishing that Section 11AC, being a penal provision, operates prospectively.

Issue 2: Continuing Default and Application of New Enactments

The court analyzed the concept of a continuing default and its implications on the application of new enactments. It was held that if a default is ongoing when a new enactment comes into force, the new provisions can be applied even if the default began under the old law. Citing the case of Smt. Maya Rani Punj v. Commissioner of Income Tax, Delhi, the court emphasized that penalties for continuing defaults are imposed based on the law in force when the wrongful act occurred. The judgment highlighted that a default is considered a continuing offence until rectified, supporting the application of new laws to address ongoing defaults.

Conclusion:

The court concluded that Section 11AC of the Central Excise Act should be applied prospectively, even if the default occurred during a period when the provision was in effect. The judgment rejected the argument that invoking Section 11AC for a default spanning before and after its enactment would amount to retrospective application. The court's decision aligned with legal principles governing continuing defaults and the application of penalties based on the law at the time of the offence. Consequently, the appeal was dismissed, and no costs were awarded.