2009 (8) TMI 609 - AT - Central Excise

Penalty- The appellants were engaged in the manufacture of non-alloy steel ingots which were classifiable under Chapter 72 of the First Schedule to the Central Excise Tariff Act, 1985. The appellants had opted for compounded levy scheme from September, 1997 to March, 2000 and therefore, opted to discharge the duty liability under Rule 96Zo(3) of the erstwhile Central Excise Rules, 1944 read with section 3A of Central Excise Act, 1944. Thereafter, a show cause notice came to be issued on 4th of December, 2006 requiring the appellants to satisfy the authorities as to why penalty should not be imposed in terms of statutory provisions. Held that- the contention on behalf of the appellants that applying principle behind Section 11A, the authority could not have invoked powers under Rule 96ZO after the expiry of the period of 5 years cannot be accepted. Hence, the appeal along with the stay application, fails and are dismissed.

Summary

Issues:
- Imposition of penalty under Rule 96Z0(3) for failure to pay duty within stipulated time.
- Applicability of Section 11A of the Central Excise Act, 1944 to initiate penalty proceedings.
- Interpretation of reasonable period for initiating penalty proceedings.
- Comparison of provisions under Rule 96Z0 with Section 11A for limitation period.
- Independence of proceedings under Rule 96Z0 from Section 11A.

Analysis:
1. The case involved the imposition of a penalty of Rs. 1,06,91,835 under Rule 96Z0(3) due to failure to pay duty within the prescribed time limit. The appellants, engaged in manufacturing non-alloy steel ingots, opted for a compounded levy scheme but failed to discharge their duty liability promptly, leading to the penalty imposition by the Commissioner.

2. The appellants contested the penalty, arguing that the penalty was unjustified as the duty amount along with interest had been paid subsequently. They contended that the penalty proceedings initiated after a significant delay of 6 to 8 years were unwarranted, emphasizing the absence of any prescribed limitation period for penalty actions under Rule 96Z0(3).

3. The appellants relied on legal precedents to support their argument that penalty actions should be initiated within a reasonable period, even in the absence of a specific limitation period. They highlighted the applicability of Section 11A of the Central Excise Act, 1944, which sets a maximum period of 5 years for recovery of duty, to emphasize the need for timely penalty proceedings.

4. The Tribunal analyzed the provisions of Rule 96Z0(3) governing the imposition of penalties, noting that the conditions for invoking the extended limitation period under Section 11A were not met in this case. The Tribunal emphasized that the penalty provisions under Rule 96Z0 were distinct from those under Section 11A, indicating the independent nature of penalty proceedings under Rule 96Z0.

5. The Tribunal rejected the appellants' argument regarding the application of the principle behind Section 11A to Rule 96Z0, stating that the absence of specific circumstances for invoking the extended limitation period precluded such an application. The Tribunal emphasized that the legislative intent behind the penalty provisions of Rule 96Z0 was to ensure compliance with duty payment obligations chosen by the assessee.

6. Regarding the concept of a reasonable period for initiating penalty proceedings, the Tribunal clarified that in cases involving statutory revenue obligations, the absence of a limitation period does not grant defaulters any rights. The Tribunal cautioned against interpreting reasonableness to benefit defaulting parties at the expense of public funds, emphasizing the need to adhere to statutory provisions as drafted by the legislature.

7. Ultimately, the Tribunal found no merit in the appeal, upholding the penalty imposition under Rule 96Z0(3) due to the appellants' failure to pay duty within the stipulated time. The appeal and stay application were dismissed, affirming the penalty decision by the Commissioner.