2009 (8) TMI 619 - 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 proceeding under Rule 96Z0 are independent and distinct from those under the proviso to Section 11A. In these circumstances, 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. Thus the appeal is failed.

Summary

Issues:
Imposition of penalty under Rule 96Z0(3) for delayed duty payment.

Analysis:
The appeal concerned a penalty imposed by the Commissioner for failure to pay duty within the stipulated time under Rule 96Z0(3). The appellants, engaged in manufacturing non-alloy steel ingots, opted for a compounded levy scheme and discharged the duty liability under the Central Excise Rules. The department noted a delay in duty payment, which was eventually settled by the appellants. The Commissioner imposed the penalty despite the duty payment, leading to the appeal. The appellants argued that the penalty was unjustified due to the absence of a prescribed time limit for penalty initiation and lack of intention to evade duty. They referenced various legal precedents supporting the initiation of actions within a reasonable period.

The advocate for the appellants contended that the absence of a specified limitation period in Rule 96Z0(3) necessitated action within a reasonable timeframe, citing legal principles and court decisions. The argument emphasized the application of principles under Section 11A of the Central Excise Act, even though not directly applicable, to ensure timely penalty imposition. The appellants stressed that the penalty should have been initiated within a reasonable period, considering the nature of the violation and the absence of specific time limits in the law.

The Tribunal analyzed the provisions of Rule 96Z0(3) governing penalty imposition for delayed duty payment. It highlighted the legislative intent behind the penalty provisions, emphasizing that the penalty was designed for cases of non-compliance with duty payment obligations, despite the flexibility given to manufacturers in choosing duty payment methods. The Tribunal rejected the appellants' argument that the principles of Section 11A should apply to the penalty under Rule 96Z0(3), asserting the independence and distinction of proceedings under the two provisions.

The Tribunal dismissed the appeal, emphasizing that in cases of statutory duty payment obligations, the concept of a reasonable period for action initiation does not grant rights to defaulters. It underscored that delays or inaction by authorities in initiating proceedings against defaulters do not confer rights on defaulters, especially when defaulters have control over duty payment timing. The Tribunal cautioned against interpreting statutory provisions to favor defaulters at the expense of public funds, asserting that the concept of reasonableness should not rewrite legislative intent. The appeal and stay application were consequently dismissed.