2004 (11) TMI 185 - AT - Central Excise

Summary

Issues:
1. Reduction of penalty by the Commissioner (Appeals).
2. Interpretation of Rule 96ZP of the Central Excise Rules.
3. Discretion of assessing Authority in levying penalty.

Issue 1 - Reduction of penalty by the Commissioner (Appeals):
The appeal was filed by the Revenue against the Order-in-Appeal reducing the penalty from Rs. 22.87 lakhs to Rs. 1.5 lakh. The Commissioner (Appeals) confirmed the duty demand but reduced the penalty due to financial constraints faced by the respondents, who had partially paid the duty before the show cause notice and the remaining during the Adjudication proceedings. Citing the case of Beauty Dyers v. Union of India, the Commissioner held that the penalty mentioned in Rule 96ZQ is the maximum amount, and the assessing officer has the discretion to levy a lesser penalty based on the circumstances of each case.

Issue 2 - Interpretation of Rule 96ZP of the Central Excise Rules:
The Additional Commissioner confirmed the duty demand and imposed a penalty equivalent to the outstanding duty amount on M/s. Rana Steels. The Revenue contended that Rule 96ZP(3) mandates a penalty equal to the outstanding duty amount or Rs. 5,000, whichever is greater. However, the Tribunal noted that the penalty mentioned in the rule is not the maximum penalty but the only penalty to be levied for failure to pay duty on time. The Supreme Court's decision in State of Madhya Pradesh v. BHEL clarified that the penalty stipulated is the maximum amount, and the assessing Authority has the discretion to levy a lesser penalty based on the facts and circumstances of each case.

Issue 3 - Discretion of assessing Authority in levying penalty:
The Tribunal considered the submissions of both sides and acknowledged that the respondents had not discharged their duty liability within the stipulated time. However, based on the financial hardship faced by the respondents and their efforts to pay the duty before the show cause notice and during the Adjudication proceedings, the Tribunal held that the penalty should not be imposed at the maximum amount. Relying on previous judgments, including Beauty Dyers and State of Madhya Pradesh v. BHEL, the Tribunal concluded that the assessing Authority has the discretion to levy a lesser penalty depending on the facts and circumstances of each case. Therefore, the appeal filed by the Revenue was rejected, upholding the decision of the Commissioner (Appeals) to reduce the penalty.