2006 (8) TMI 214 - HC - Central Excise

Summary

Issues:
1. Whether abatement can be granted when only one furnace in a factory is closed as per Section 3A of the Central Excise Act, 1944?
2. Whether the penalty imposed for non-payment of duty under Section 3A is mandatory or discretionary?

Issue 1: Abatement Claim for Closure of One Furnace:
The case involved a dispute regarding the eligibility of abatement when only one furnace in a factory was closed. The assessee, a manufacturer of non-alloy steel ingots, claimed abatement under Section 3A of the Central Excise Act, 1944, for the closure of one furnace. The Tribunal allowed the abatement claim, emphasizing that each furnace in the factory operated independently with separate records and electricity connections. The Tribunal noted that the furnaces were treated as separate units by the assessee and the department, with independent registrations. The High Court upheld the Tribunal's decision, distinguishing it from a previous judgment and emphasizing that the two furnaces constituted separate factories within the same compound.

Issue 2: Penalty Imposed for Non-Payment of Duty:
The second issue pertained to the nature of the penalty imposed under Rule 96ZO(3) for non-payment of duty under Section 3A. The Tribunal had set aside the penalty, considering the delay in payment due to the pending abatement claim. The High Court, citing a previous judgment, reiterated that the penalty under Rule 96ZO(3) is discretionary and not mandatory. As the delay in payment was linked to the abatement claim status, the High Court agreed with the Tribunal's decision to set aside the penalty.

In conclusion, the High Court dismissed the appeal, affirming the Tribunal's decisions on both issues. The judgment clarified the eligibility criteria for abatement under Section 3A and reiterated the discretionary nature of the penalty under Rule 96ZO(3) in cases involving non-payment of duty.