2014 (7) TMI 923 - HC - Central Excise

Compounded Levy Scheme - penalty for late deposit - Commissioner (Appeals) set aside the imposition of penalty for late deposit of duty from March 1998 to April 1999 on the ground that proceedings for the same were initiated after five years from the relevant date. - validity of erstwhile Rule 96(ZP) permitting imposition of penalty equal to the amount of duty for delay in payment of duty, without any discretion - Held that - Tribunal had rightly upheld the order of Commissioner (Appeals) deleting the penalty for the period March 1998 to April 1999. - Decided against the revenue. In Raghuvar (India) Limited s case 2000 (5) TMI 40 - SUPREME COURT OF INDIA , the Apex Court held that any law or stipulation prescribing a period of limitation to do or not to do a thing after the expiry of period so stipulated has the consequence of creation and destruction of rights and, therefore, must be specifically enacted and prescribed therefor.

Summary

Issues:
1. Interpretation of Compounded Levy Scheme under the Central Excise Act, 1944.
2. Imposition and waiver of mandatory penalty under Rule 96(ZP) of Central Excise Rules, 1944.
3. Applicability of limitation provisions under section 11A of the Central Excise Act, 1944 to the Compounded Levy Scheme.
4. Application of section 38A of the Central Excise Act, 1944 to obligations under erstwhile Central Excise Rules, 1944.

Analysis:
1. The appeal concerned the interpretation of the Compounded Levy Scheme under the Central Excise Act, 1944. The appellant questioned the validity of penalties imposed under Rule 96(ZP) without discretion for delays in payment. The Tribunal dismissed the appeal based on a previous judgment, noting that penalties initiated after five years were not valid. The court upheld this decision, emphasizing the reasonable period of limitation for penalty proceedings.

2. The issue of imposing and waiving mandatory penalties under Rule 96(ZP) was also addressed. The respondent, a steel industry, failed to pay duty on time under the Compounded Levy Scheme. The adjudicating authority imposed penalties for late payments, which were partially set aside by the Commissioner (Appeals). The Tribunal upheld the Commissioner's decision, leading to the current appeal. The court affirmed the Tribunal's ruling, highlighting the importance of initiating penalty proceedings within a reasonable period.

3. Regarding the applicability of limitation provisions, the court referenced section 11A of the Central Excise Act, 1944. The appellant argued for penalties based on a previous Supreme Court judgment. However, the court found no merit in this argument, citing the reasonable five-year limitation period for penalty proceedings. The court emphasized the need for penalties to be imposed within a reasonable timeframe to uphold fairness and legality.

4. Lastly, the application of section 38A of the Central Excise Act, 1944 to obligations under erstwhile Central Excise Rules, 1944 was discussed. The court clarified that despite the omission of certain rules, obligations and liabilities incurred before the omission remained valid. The court dismissed the appeal, affirming the Tribunal's decision to delete penalties for a specific period due to delays in initiating penalty proceedings. The judgment highlighted the importance of adhering to reasonable timeframes for penalty imposition to ensure legal validity and fairness in tax matters.