2009 (7) TMI 640 - AT - Central Excise

Rectification of Mistake- The issue of quantum of penalty under Section 11AC has been in dispute for past some time, as to whether there is a discretion/scope to levy penalty below the prescribed minimum. There have been conflicting judgments of various High Courts on this issue. Now the issue has been decided by the Hon ble Supreme Court in the case of Union of India v. Dharamendra Textile Processors and it has been held that there is no scope for any discretion and that the levy of penalty is mandatory under these provisions. It has also been held that where the Statute provides for penalty for failure or default of statutory or civil obligations provided under the Act and the Regulations framed there under, mens rea is not an essential element for imposing penalty. Held that- it is felt that the decision of the Tribunal would be in conflict with the ratio of the Dharamendra Textiles case and consequently, it is felt that the Final Order has to be recalled and the matter reheard. Therefore, the Revenue s ROM application is allowed by way of recalling the Final Order No. 1048/2008 dated 9-9-2008. Registry may list the case for re-hearing before the Division Bench.

Summary

Issues:
1. Dispute regarding the quantum of penalty under Section 11AC.
2. Invocation of a longer period and confirmation of penalty under Section 11AC.
3. Application for Rectification of Mistake (ROM) based on conflicting judgments and the decision of the Hon'ble Supreme Court in Union of India v. Dharamendra Textile Processors.
4. Argument against the applicability of penalty in the absence of fraud, collusion, or wilful mistake.
5. Reconsideration of the Final Order No. 1048/2008 dated 9-9-2008 waiving the imposition of mandatory penalty under Section 11AC.

Analysis:
1. The first issue revolves around the dispute over the quantum of penalty under Section 11AC. The Hon'ble Supreme Court's decision in Union of India v. Dharamendra Textile Processors clarified that there is no discretion to levy penalty below the prescribed minimum and that mens rea is not essential for imposing penalty when the statute provides for it. This issue has seen conflicting judgments from various High Courts.

2. The second issue concerns the invocation of a longer period and the confirmation of penalty under Section 11AC against the assessee. The ROM application was filed to rectify the Final Order based on the decision in the case of Hindustan Lever Ltd. v. CCE, Mumbai-I, which emphasized that even post-order judgments by superior courts can be considered as errors apparent from the record.

3. The ROM application sought a reconsideration of the Final Order in light of the Dharamendra Textile Processors case, requesting the waiver of the mandatory penalty under Section 11AC. The application highlighted the need to align with the Supreme Court's interpretation and the precedence set by the Larger Bench of the Tribunal.

4. The argument against the applicability of penalty without fraud, collusion, or wilful mistake was supported by various case laws, including judgments from the Supreme Court and different High Courts. The absence of specific elements set out in Section 11AC was emphasized to contest the imposition of penalty.

5. The final decision allowed the Revenue's ROM application, recalling the Final Order for rehearing before the Division Bench. The conflict between the Tribunal's decision and the ratio of the Dharamendra Textiles case necessitated the reconsideration of the penalty imposition, indicating the importance of aligning with the Supreme Court's interpretations in such matters.