1989 (9) TMI 114 - HC - Central Excise

Summary

Issues Involved
1. Central Government's power to enhance the penalty beyond what was done by the Assistant Collector.
2. The purported exercise of the power of penalty being perverse in the circumstances of the case.
3. Recovery of short levy of duty after goods have been lawfully cleared from the factory (this issue was given up by the petitioner).

Detailed Analysis

1. Central Government's Power to Enhance the Penalty:

The main question was whether the Central Government had the authority to enhance the penalty beyond what was decided by the Assistant Collector. The relevant statutory provisions examined were Section 36(1) and Section 36(2) of the Central Excises and Salt Act, 1944.

- Section 36(1): This section allows the Central Government to reverse or modify any decision or order passed under the Act or the rules made thereunder by any Central Excise Officer or the Central Board of Excise & Customs, provided no appeal lies against that decision or order.

- Section 36(2): This section gives the Central Government suo motu jurisdiction to revise orders passed under Section 35 or Section 35A of the Act to ensure their correctness, legality, or propriety.

The Court observed that the Central Government's revisional power under Section 36(2) is limited to orders passed under Section 35 or Section 35A. The Assistant Collector's order had merged with the Collector's order, which had reduced the penalty from Rs. 250/- to Rs. 100/-. The Central Government could not enhance the penalty beyond what the Collector had decided, i.e., Rs. 100/-. The Central Government's action of enhancing the penalty to Rs. 50,000/- was beyond its jurisdiction.

The Court cited the Supreme Court's judgment in A.St. Arunachalam Pillai v. M/s. Southern Roadways Ltd., which held that revisional powers could not be exercised to pass an order that the original authority had no jurisdiction to pass. The Court concluded that the Central Government had overstepped its revisional authority by enhancing the penalty beyond what was decided by the Collector.

2. Purported Exercise of the Power of Penalty:

The second issue was whether the exercise of the power to impose a higher penalty by the Central Government was perverse. However, the Court found it unnecessary to delve into this issue in detail because the first point regarding the jurisdiction of the Central Government was sufficient to decide the case.

The Court mentioned the reliance on the Supreme Court's judgment in M/s. Hindustan Steel Ltd. v. The State of Orissa, but chose not to examine this point further.

3. Recovery of Short Levy of Duty:

The third issue concerning the recovery of short levy of duty after the goods had been lawfully cleared from the factory was not pressed by the petitioner during the arguments. Therefore, the Court did not make any order regarding this issue.

Conclusion

The petition succeeded partially. The Court set aside the impugned order passed by the Central Government and restored the order passed by the Collector in Appeal. There was no order as to costs. The Court clarified that their interpretation of Section 36(2) related to the unamended section, acknowledging that it had undergone amendments thereafter.