2001 (10) TMI 138 - AT - Central Excise

Issues Involved:

1. Imposition of penalty under Rule 173Q of the Central Excise Rules.
2. Imposition of penalty under Section 11AC of the Central Excise Act.
3. Inclusion of pumping charges in the assessable value of excisable goods.
4. Bona fide belief and voluntary payment before the issuance of the show cause notice.
5. Discretionary nature of penalty imposition.

Issue-wise Detailed Analysis:

1. Imposition of Penalty under Rule 173Q of the Central Excise Rules:

The Commissioner of Central Excise, Mumbai-II, imposed a penalty of Rs. 2,07,00,000/- under Rule 173Q for the period from 1-4-1994 to 27-9-1996. The adjudicating authority interpreted Rule 173Q similarly to Section 11AC, emphasizing that the provision mandates the imposition of a penalty, though the amount is discretionary. The Supreme Court in Zunjarrao Bhikaji Nagarkar v. UOI held that the levy of penalty under Rule 173Q is not discretionary, but the quantum is. The Tribunal noted that despite the payment of duty before the issuance of the show cause notice, the original offence was not erased.

2. Imposition of Penalty under Section 11AC of the Central Excise Act:

A penalty of Rs. 1,17,59,557/- was imposed under Section 11AC for the period from 28-9-1996 to 31-10-1998. The adjudicating authority issued a corrigendum proposing this penalty from September 1996 onwards. The Tribunal upheld that Section 11AC mandates a penalty equal to the duty determined, reinforcing that the imposition is obligatory, but the quantum can be adjusted based on the gravity of the offence and extent of evasion.

3. Inclusion of Pumping Charges in the Assessable Value of Excisable Goods:

The department's intelligence indicated that the appellants were charging and recovering pumping charges separately via debit notes, which were not included in the assessable value of the products. The investigation revealed that these charges were recovered over and above the declared price of excisable goods. The appellants argued that these charges were akin to transportation charges and believed they were not required to include them in the assessable value. The Tribunal found that the failure to declare these charges constituted a comprehensive failure to discharge statutory duties.

4. Bona Fide Belief and Voluntary Payment Before Issuance of Show Cause Notice:

The appellants contended that they were under a bona fide belief that the pumping charges were transportation charges, hence not includable in the assessable value. They also highlighted that the differential duty and interest were paid before the issuance of the show cause notice. The Tribunal acknowledged the payment but emphasized that cooperation with the investigation and voluntary payment after the offence's discovery did not negate the original offence.

5. Discretionary Nature of Penalty Imposition:

The appellants argued that the imposition of the full penalty was not justified, citing the Supreme Court's judgment in BHEL v. State of Madhya Pradesh, which indicated that the maximum penalty is merely an upper limit. The Tribunal agreed that while the imposition of a penalty is mandatory, the quantum is discretionary. Considering the facts, including the pre-notice payment of duty and interest, the Tribunal reduced the penalties to Rs. 10 lakhs under Rule 173Q and Rs. 10 lakhs under Section 11AC, finding this amount commensurate with the gravity of the offence and extent of evasion.

Conclusion:

The Tribunal upheld the imposition of penalties under Rule 173Q and Section 11AC but reduced the quantum to Rs. 10 lakhs each, considering the circumstances and the Supreme Court's guidance on the discretionary nature of penalty amounts. The appeal was thus modified to reflect these reduced penalties but otherwise dismissed.

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