2005 (11) TMI 163 - AT - Central Excise

Production capacity based duty - Interest and penalty - Imposition of - Administrative law - Interpretation of statutes

Summary

Issues:
1. Re-determination of actual production and duty liability of manufacturers of Mild Steel Ingots under the Hot Re-rolling Mills Induction Furnace Annual Capacity Determination Rules, 1997.
2. Confirmation of duty and penalty raised in show cause notices.
3. Omission of Section 3A of the Central Excise Act and its impact on pending proceedings.
4. Legality of interest provision under Rule 96ZO(3) in light of the Constitution Bench judgment.
5. Legality of penalty provisions under Rule 96ZO(3) and delegation of legislative power.

Detailed Analysis:
1. The appeals involved the re-determination of actual production and duty liability of manufacturers of Mild Steel Ingots under the Hot Re-rolling Mills Induction Furnace Annual Capacity Determination Rules, 1997. The issue was whether the manufacturers could switch from duty liability under Rule 96ZO(3) to payment of duty under Section 3A of the Central Excise Act, 1944 (Actual production basis).

2. Appeal No. E/2246/03 concerned the confirmation of duty and penalty raised in show cause notices totaling Rs. 97,62,588/-. The duty amount was raised based on the determination of Actual Capacity of Production under Rule 96ZO(3) of the Central Excise Rules.

3. The main issue revolved around the omission of Section 3A of the Central Excise Act and its impact on pending proceedings. The appellants argued that since Section 3A was omitted without a saving clause, pending proceedings could not be continued. They relied on a Tribunal order and Supreme Court judgments to support their contention.

4. The legality of the interest provision under Rule 96ZO(3) was questioned in light of a Constitution Bench judgment which held that interest can only be levied if the taxing statute makes a substantive provision for it. The analysis highlighted the absence of specific provisions empowering delegated legislation to levy interest under Rule 96ZO(3).

5. The issue of penalty provisions under Rule 96ZO(3) was examined, emphasizing that penalty is a substantive liability requiring plenary legislation. The analysis concluded that there was no provision in the Central Excise Act enabling the framing of rules for penalty imposition under Rule 96ZO(3. The delegation of powers and the source of legislating penalty provisions were thoroughly scrutinized, leading to the finding that the penalty provisions were ultra vires.

In conclusion, the Tribunal set aside the demand, interest, and penalty, allowing the appeals based on the findings related to the legality of the provisions under Rule 96ZO(3) in light of the omitted Section 3A of the Central Excise Act and the delegation of legislative power.