2015 (2) TMI 344 - HC - Central Excise

Penalty under Section 96ZP(3) - Whether the Commissioner (Appeals) and the Appellate Tribunal are right in reducing the penalty from ₹ 37,818/ to ₹ 5,000/ when the said penalty was imposed in accordance with Rule 96 ZP (3) of the Central Excise Rules, 1944, which is mandatory by law, when the respondent has committed default in payment of duty - Held that - Issue stands covered by the decision of the Supreme Court in Commissioner of Customs & Central Excise, Coimbatore Vs Kannapiran Steel Re-Rolling Mills (2010 (12) TMI 146 - SUPREME COURT OF INDIA), wherein the Supreme Court has considered identical question of reduction of penalty imposed under Rule 96 ZP (3) of the Central Excise Rules - substantial questions of law are answered in favour of the Revenue and against the assessee. Accordingly, the order of the Tribunal stands set aside - Decided in favour of Revenue.

Summary

Issues:
Reduction of penalty under Section 96 ZP (3) of the Central Excise Rules by the Commissioner (Appeals) and the Appellate Tribunal.

Analysis:
The case involved an appeal by the Revenue against the order of the Tribunal reducing the penalty imposed on the assessee under Section 96 ZP (3) of the Central Excise Rules. The respondent, a manufacturer of iron and steel products, had opted for payment of duty under the compounded levy scheme. The duty was determined by the Commissioner, and as per Rule 96 ZP (3) of the Rules, the manufacturer was required to pay the duty by the 10th day of the month. Failure to pay would result in the duty being payable with interest and a penalty. The Deputy Commissioner re-determined the payable amount and fixed a penalty of Rs. 37,818 for the respondent's failure to pay the duty as prescribed.

The respondent appealed to the Commissioner (Appeals), who reduced the penalty to Rs. 5,000. Subsequently, the Revenue appealed to the Appellate Tribunal, which upheld the Commissioner's decision. The Revenue then approached the High Court challenging the reduction of penalty. The Revenue contended that the reduction of penalty was not permissible under the law and cited a Supreme Court decision in a similar matter to support their argument.

The High Court analyzed the relevant provisions of Rule 96 ZP and compared them with other related rules. Referring to the Supreme Court decision, the High Court held that the rules in question were mandatory, and there was no discretion available for reducing the penalty. As Rule 96 ZP was found to be identical to the rules discussed in the Supreme Court case, the High Court allowed the appeal, setting aside the orders of the Tribunal and the Commissioner (Appeals), and restoring the order of the adjudicating authority. The High Court ruled in favor of the Revenue, stating that the penalty reduction was not permissible under the law.

In conclusion, the High Court allowed the appeal by the Revenue, setting aside the orders of the lower authorities and restoring the penalty imposed by the adjudicating authority. The decision was based on the mandatory nature of Rule 96 ZP and the lack of discretion available for reducing the penalty. The substantial questions of law were answered in favor of the Revenue, and the appeal was allowed with no order as to costs.