2013 (1) TMI 248 - AT - Central Excise

Compounded levy scheme - Rule 96 ZO(3) - Appellant manufactures ingots and billets - Failure to discharge duty liability by the due date - Department impose penalty under provision of said rule 96 ZO(3) - Held that - Following the decision in case of Bansal Alloys & Steel Pvt. Ltd. (2010 (11) TMI 83 - PUNJAB & HARYANA HIGH COURT ), that the impugned Rule 96ZO(3) of the Central Excise Rules to the extent of providing for mandatory minimum penalty without any men rea and without any element of discretion is excessive and unreasonable restriction on fundamental rights is arbitrary. Moreover, exercise of such power by way of subordinate legislation is not permissible when rule making authority for levying penalty is limited to default with intent to evade duty . The aforesaid finding by implication means that the adjudicating authority have discretion to impose lower penalty in case of failure of the assessee to discharge the obligation of duty liability by the due date. The excise duty was paid by the appellant though after due date but the payment was made much before issue of SCN. Thus there is no justification for imposing penalty equivalent to duty not paid within due date. Accordingly, taking into account the overall facts of the case, penalty imposed on the appellant is reduced to Rs. 1,00,000/-. Partly allowed in favour of assessee

Summary

Issues:
- Imposition of penalty under Rule 96ZO(3) for failure to discharge duty liability by due date.

Analysis:
The appellant, a manufacturer of ingots and billets chargeable to central excise duty, was paying duty under the compounded levy scheme under Rule 96ZO(3). The Commissioner imposed a penalty of Rs. 25,66,669 on the appellant for failing to discharge the duty liability by the due date. The appellant challenged this order through an appeal.

The appellant's counsel argued that the Supreme Court in a previous case had left open the challenge to the vires of Rule 96ZO(3), and subsequent High Court judgments indicated that the adjudicating authority had the discretion to impose a lower penalty in cases of failure to discharge duty liability by the due date. The counsel contended that since the duty was paid after the due date but before the show cause notice was issued, the penalty imposed was not justified.

On the other hand, the Revenue's representative supported the impugned order, citing a Supreme Court judgment that emphasized the lack of discretion in reducing penalties under Rule 96ZO(3) and the requirement to impose penalties equal to the duty determined under the Central Excise Act.

After considering the arguments, the Tribunal noted that the Supreme Court had not addressed the vires of Rule 96ZO(3) in the judgment relied upon by the Revenue. The Tribunal also highlighted a High Court judgment declaring the rule excessive and unreasonable, allowing for the adjudicating authority to exercise discretion in imposing lower penalties for failure to discharge duty liability by the due date. Since the excise duty was paid before the show cause notice, the Tribunal found no justification for the penalty equal to the duty not paid within the due date. Consequently, the penalty was reduced to Rs. 1,00,000.

In conclusion, the Tribunal disposed of the appeal by reducing the penalty imposed on the appellant based on the principles of discretion in penalty imposition for delayed duty payments as established by relevant legal precedents and judgments.