2024 (10) TMI 214 - AT - Central Excise

Compounded levy scheme - whether at the relevant time when the orders-in-original were passed in absence of any saving clause and omission of Section 3A of the Central Excise Act, 1944 read with Rule 96 ZO, ZP and ZQ of the Central Excise Rules, 1944 whether the orders-in-original passed by the adjudicating authority holding that the appellants are liable to pay duty as per the compound levy scheme? - HELD THAT - In absence of the aforesaid provision and any saving clause the adjudicating authority had no statutory power to decide any matter related to compounded levy scheme in terms of Section 3A of Central Excise Act, 1944 and under the provision of Rules, 96ZO, ZP and ZQ of Central Excise Rules, 1944 for the reason that it is not only the issuance of show cause notices but entire proceedings such as adjudication of such show cause notices has to be governed by statutory provision and the said proceeding was envisaged under Rule, 96 ZO, ZP and ZQ. Once the said Rule was omitted w.e.f. 01.03.2001 thereafter, no provision exist by which the adjudication authority has any power to adjudicate the matter related to the compounded levy scheme in terms of Section 3A of the Central Excise Act, 1944. Therefore, the orders passed by the adjudicating authority are non-est and having no support of any authority of law. On this ground, the entire proceedings of show cause notices and adjudication there of gets vitiated. It is settled that in absence of any saving clause while omitting the provision of Section 3A of Central Excise Act, 1944and Rules, 96 ZO, ZP and ZQ of the Central Excise Rules, 1944 adjudication order passed after 01.03.2001, the adjudication proceeding is not legal and correct, consequently no demand can be confirmed. Since the Orders-in-original, itself are without authority of law, demand confirmed under the said orders-in-original cannot be sustained. Therefore, the impugned orders are not sustainable - Appeal allowed.

Summary

Issues Involved:

1. Validity of demand under the Compounded Levy Scheme after the omission of Section 3A and Rule 96ZQ.
2. Applicability of Section 6 of the General Clauses Act to the omission of Section 3A.
3. Impact of Section 38A of the Central Excise Act on obligations incurred under Rule 96ZQ.
4. Constitutionality of Rule 96ZQ(5)(ii) concerning penalty imposition.
5. Jurisdictional authority to adjudicate after the omission of relevant provisions.
6. Impact of Supreme Court and High Court decisions on ongoing proceedings.

Detailed Analysis:

1. Validity of Demand under Compounded Levy Scheme:

The Appellants were issued show cause notices demanding differential central excise duty under the Compounded Levy Scheme, which was adjudicated by the authorities confirming the duty demand. However, the Compounded Levy Scheme was based on Section 3A of the Central Excise Act, 1944, and Rule 96ZQ of the Central Excise Rules, 1944, both of which were omitted without any saving clause. The Tribunal found that without these provisions, the adjudicating authority lacked statutory power to enforce the Compounded Levy Scheme, rendering the orders non-est and the proceedings vitiated.

2. Applicability of Section 6 of the General Clauses Act:

The Tribunal considered whether obligations or liabilities incurred under Section 3A could be saved by Section 6 of the General Clauses Act. It was concluded that Section 6 applies only to repeals and not to omissions. Therefore, any obligation or liability under Section 3A was not saved post its omission.

3. Impact of Section 38A of the Central Excise Act:

Section 38A of the Central Excise Act was examined to determine if it could save obligations incurred under Rule 96ZQ. The Tribunal concluded that Section 38A applies to amendments, repeals, or rescissions but not to omissions. Consequently, obligations under the omitted Rule 96ZQ were not protected by Section 38A.

4. Constitutionality of Rule 96ZQ(5)(ii):

Rule 96ZQ(5)(ii) imposed a mandatory penalty equal to the duty outstanding, regardless of the delay period. The Tribunal found this provision ultra vires Articles 14 and 19(1)(g) of the Constitution, as it treated unequals equally and imposed unreasonable restrictions on business. The rule was struck down for being beyond the authority of the rule-making power.

5. Jurisdictional Authority Post-Omission:

The Tribunal addressed whether proceedings could continue after the omission of Section 3A and Rule 96ZQ. It was determined that no new proceedings could be initiated, and pending proceedings would lapse if not concluded before the omission. The orders passed post-omission lacked legal authority and were quashed.

6. Impact of Supreme Court and High Court Decisions:

The Tribunal relied on the Gujarat High Court's decision in Krishna Processors and the Supreme Court's decision in Shree Bhagwati Steel Rolling Mills, which upheld the view that post-omission proceedings were invalid without a saving clause. The Tribunal aligned with these precedents, reinforcing the non-sustainability of the orders.

In conclusion, the Tribunal set aside the impugned orders, declaring them without authority of law, and allowed the appeals with consequential relief. The decision underscores the necessity of a saving clause to sustain proceedings post-omission of statutory provisions.