2003 (4) TMI 184 - AT - Central Excise

Summary

Issues:
Challenge to penalty imposed under Rule 96ZP(3) of the Central Excise Rules, 1944.

Analysis:
In this appeal, the Appellants contested the penalty imposed on them by the Commissioner under Rule 96ZP(3) of the Central Excise Rules, 1944. The Appellants, engaged in manufacturing Hot Rolled products of Non-alloy steel, opted for duty payment on a lump sum basis under Rule 96ZP(3). The Commissioner initially fixed their Annual Capacity of Production at 52,467 M.T. from 1-9-97 but later revised it to 38,429.99 M.T. from 1-9-1998. The Appellants were asked to deposit duty amounting to Rs. 23,28,128/- for the period from December 1999 to March 2000, which they paid by debiting Cenvat credit and PLA accounts. The Commissioner confirmed the duty and imposed an equal penalty under Rule 96ZP(3). The Appellants argued they could pay duty on any final product out of the Cenvat credit and that the payment method was revenue-neutral, as they had paid duty through PLA in the financial year 2000-01. They contended that no penalty should be imposed as they had applied for revision of their production capacity and were entitled to abatement under Section 3A(3) of the Central Excise Act.

Analysis - Issue 1:
The first issue was whether the Appellants were allowed to pay duty through their Cenvat credit account. While the Revenue argued that duty should be paid in cash or through PLA, it was acknowledged that the Appellants had sufficient balance in PLA to make the payment. The Tribunal agreed that the payment method resulted in revenue neutrality, given the duty paid through PLA and Cenvat credit for goods cleared.

Analysis - Issue 2:
The second issue revolved around the imposition of penalty under Rule 96ZP(3). The Rule stipulates that a penalty equal to the outstanding duty amount is payable if not paid by the 10th of the month. The Commissioner found that the Appellants had not filed for determination of duty liability under Section 3A(4) and had not paid the duty by the due date. Therefore, a penalty was deemed applicable. However, considering the circumstances, the Tribunal determined that a penalty equivalent to the duty amount was not warranted. Instead, the Tribunal directed the Appellants to pay a penalty of Rs. 2 lakhs, finding it to be just and fair. Consequently, the appeal was partly allowed.