2014 (5) TMI 791 - HC - Central Excise

Duty demand - Equivalent penalty - Held that - The reasons of imposing penalty are inherent in the order dated 30-6-2010 when the Tribunal has affirmed the stand of the appellant as untenable - The appellant improved its stand at different stage of proceedings. The variation in the d factor was found as a matter of fact, therefore, the mens rea in not declaring the increased capacity is apparent. Though the authority has imposed 100% of the short amount of the duty as penalty but keeping in view the fact the amount of penalty is only Rs. 1,23,620/-, we do not find that such amount calls for any interference. Such amount is not even sufficient to set off the expenses incurred by the department in prosecuting the present proceedings forced upon the department for the wrongful and changing stand of the appellant - Decided against Assessee

Summary

Issues:
1. Appeal under Section 35G of Central Excise Act, 1944 challenging penalty upheld by Customs, Excise and Service Tax Appellate Tribunal.
2. Variations in production capacity factors leading to penalty imposition under Rule 96ZP(1) of Central Excise Rules, 1944.
3. Applicability of compounded levy scheme and penalty imposition.
4. Discrepancy in penalty imposition under Rule 96ZP(1) without invoking it in the show cause notice.
5. Benefit of reduced penalty under proviso to Section 11AC in the absence of intentional evasion.

Detailed Analysis:
1. The appeal was filed challenging the penalty upheld by the Tribunal under Rule 96ZP(1) of the Central Excise Rules, 1944, due to variations in declared production capacity factors. The appellant argued that the penalty was unjust as the variations were attributed to wear and tear of machinery, not intentional evasion.

2. The Tribunal affirmed the penalty under Rule 96ZP(1) within the compounded levy scheme, emphasizing the need for accurate declaration of production factors. The appellant contended that the penalty imposition was not justified as the factors affecting capacity were due to normal wear and tear, supported by technical expert reports.

3. The Court examined whether the penalty under Rule 96ZP(1) was correctly imposed despite not being invoked in the show cause notice. It was established that mentioning the wrong provision does not render proceedings illegal if the authority has the power to impose the penalty and preconditions are met.

4. The Court further analyzed the benefit of reduced penalty under the proviso to Section 11AC, noting that the appellant's evolving explanations regarding production capacity factors did not absolve them of liability. The Tribunal's findings on the variations and the penalty imposition were deemed legally justified.

5. The Court dismissed the appeal, upholding the penalty imposition under Rule 96ZP(1) due to discrepancies in declared production factors. The appellant's changing stance during proceedings indicated a lack of diligence in declarations, leading to the penalty imposition. Despite arguments against the penalty amount, the Court found it appropriate given the circumstances and upheld the Tribunal's decision.

By thoroughly analyzing the issues raised in the appeal and the Tribunal's decision, the Court affirmed the penalty imposition under Rule 96ZP(1) within the compounded levy scheme, emphasizing the importance of accurate declarations and compliance with regulatory requirements in determining production capacity factors.