2001 (12) TMI 94 - HC - Central Excise

Summary

Issues involved: Challenge to Rule 96ZQ of Central Excise Rules, 1944 as ultra vires Section 3A and 37 of the Central Excise Act, 1944 on grounds of violating Articles 14, 19(1)(g), and 265 of the Constitution of India.

Summary:
The petitioners, engaged in the production of cotton and man-made fabrics, challenged Rule 96ZQ introduced by the Central Government under Section 3A of the Central Excise Act, 1944. This rule imposed penalties on independent processors for non-payment of duty by a specified date. The petitioners specifically contested the provision that allowed for a penalty equal to the outstanding duty amount or Rs. 5,000, whichever is greater, as being confiscatory in nature.

In response to the petitioners' arguments, the court referred to a previous decision by the Apex Court regarding a similar provision in a different context. The court highlighted that the maximum penalty mentioned in the rule should be seen as the upper limit, with the assessing authority having the discretion to impose a lesser penalty based on individual circumstances. The court emphasized that the penalty provision should not be viewed as confiscatory if applied judiciously.

Regarding the challenge to the levy of interest at 36% under the impugned Rule, the court cited another Apex Court decision which emphasized the importance of timely payment of taxes to avoid undue advantage to taxpayers. The court concluded that the petitioners' objections to the interest rate could not be sustained based on this principle.

Ultimately, the court disposed of the writ petitions, noting that the penalty mentioned in Rule 96ZQ should be considered the maximum amount that could be levied, with the assessing authority having the discretion to impose a lesser penalty as warranted by the circumstances of each case. No costs were awarded, and the connected Writ Miscellaneous Petitions were closed.