2010 (4) TMI 284 - HC - Central Excise

Initiation of penalty after 6 years - Period of limitation compounded levy scheme tribunal held that penalty has rightly been imposed upon the appellant and the period of limitation would not be attracted, because the deposit of duty was payable under the compounded levy scheme Held that - , although the duty alongwith interest had been paid as far back in March, 2000 and the show cause notice was issued on 4.12.2006, i.e. after a gap of more than 6 years, therefore, we are of the considered opinion that where no statutory period has been prescribed for initiating proceedings for imposition of penalty under Section 96 ZO3, then the proceedings should be initiated within a period of 5 years and not later than that. - the orders passed by the adjudicating authority as well the Tribunal cannot be sustained and the issuance of show cause notice (Annexure A-1) and all subsequent proceedings are bad in law

Summary

Issues:
1. Imposition of penalty under the compounded levy scheme.
2. Applicability of the period of limitation for initiating penalty proceedings.
3. Interpretation of Section 96 ZO3 regarding the initiation of penalty proceedings.

Analysis:
1. The appellant challenged the imposition of a penalty by the Customs, Excise & Service Tax Tribunal under the compounded levy scheme. The Tribunal held that the penalty was rightly imposed, and the period of limitation did not apply due to the nature of the scheme.

2. The appellant argued that the show cause notice demanding penalty was issued more than 6 years after the duty deposit, which, according to the appellant, rendered the notice invalid. Citing relevant case law, the appellant contended that in the absence of a statutory limitation period, penalty proceedings should be initiated within 5 years.

3. The Revenue, on the other hand, contended that since the penalty was related to the compounded levy scheme, no specific period of limitation applied. The Court considered the conflicting arguments and examined the legal provisions to determine the correct interpretation of the law in this context.

4. The Court deliberated on whether the Tribunal was correct in allowing penalty proceedings to be initiated after the expiration of five years. Considering the facts of the case and the absence of a prescribed statutory limitation, the Court held that penalty proceedings should be initiated within 5 years from the relevant event.

5. Relying on precedents and legal principles, the Court concluded that the show cause notice issued after more than 6 years from the duty deposit was invalid. The Court set aside the orders of the lower authorities, including the Tribunal's decision, and deemed the penalty proceedings initiated after the 5-year period as unlawful.

6. Consequently, the Court accepted the appeal, ruling in favor of the appellant, and declared that the orders passed by the adjudicating authority and the Tribunal were unsustainable. The Court emphasized the importance of adhering to the prescribed time limits for initiating penalty proceedings under Section 96 ZO3 to ensure legal validity.

7. The judgment, delivered by Hon'ble Mr. Justice Ashutosh Mohunta and Hon'ble Mr. Justice Mehinder Singh Sullar on April 21, 2010, clarified the interpretation of the law regarding the initiation of penalty proceedings and upheld the significance of adhering to the prescribed time limits in such cases.