2019 (1) TMI 710 - HC - Central Excise

Demand and levy of Interest - short payment of duty - In the absence of levy of interest in the substantive provision of Section 3A of the Central Excise Act, 1944, whether interest can be levied under Rule 96 ZO which has been framed in exercise of power conferred under the aforesaid Section 3A? - Held that - Rule 96-ZP of the Central Excise Rules stipulates the method of payment and Rule 96-ZP contains detailed provision regarding time and manner of payment and it also contains provisions relating to payment of interest and penalty in the event of delay in payment or non-payment of dues. Thus, this is a comprehensive scheme in itself and general provisions in the Act and the Rules are excluded - the Commissioner of Central Excise was obviously not right in demanding the interest from the Assessee and that the CESTAT was also not right in confirming the demand for interest. Whether confirmation of demand by the Tribunal based on annual production capacity determined by Commissioner of Customs and Central Excise without taking into account factor of electricity is utterly perverse? - Held that - There is really no reason to hold that the Assessee had indeed challenged the determination of the annual production capacity on account of power cuts/power outages and this consideration was not taken into account by the Commissioner or the CESTAT. The Memo of Appeal before the CESTAT has not been produced for our perusal. Even assuming that there was any ground in the Memo of Appeal, it does not appear that such a ground was pressed before the CESTAT - The Memo of Appeal before the CESTAT has not been produced for our perusal. Even assuming that there was any ground in the Memo of Appeal, it does not appear that such a ground was pressed before the CESTAT. When documentary evidence clearly shows of restricted supply to the Appellant/manufacturer unit during the disputed period for a continuous period of more than seven days, whether abatement as provided in sub clause (3) of Section 3A deniable ? Whether finding of the Tribunal in this regards is perverse? - Held that - Rule 96ZO(2) provides that where a manufacturer does not produce the ingots and billets of non-alloy steel during any continuous period of not less than seven days and wishes to claim abatement under sub-section (3) of Section 3A of the said Act, the abatement will be allowed by an order passed by the Commissioner of Central Excise of such amount as may be specified in such order, subject to fulfillment of certain conditions - Admittedly, in the present case, there is no material on record to establish that the Assessee had indeed fulfilled the aforesaid conditions prescribed in Rule 96ZO(2) of the said Rules. In fact, there is nothing on record to indicate that such abatement was claimed by the Assessee by following the procedure prescribed under Rule 96ZO(2) of the said Rules. In such circumstances, even the third substantial question of law will have to be answered against the Assessee. Appeal allowed in part.

Summary

Issues Involved:
1. Levy of interest under Rule 96ZO in the absence of a substantive provision in Section 3A of the Central Excise Act, 1944.
2. Confirmation of demand based on annual production capacity without considering power cuts.
3. Denial of abatement under Section 3A(3) despite restricted supply to the manufacturer.

Detailed Analysis:

1. Levy of Interest under Rule 96ZO:
The primary issue was whether interest could be levied under Rule 96ZO in the absence of a substantive provision in Section 3A of the Central Excise Act, 1944. The Appellant argued that Rule 96ZO, which provided for the levy of interest, was ultra vires the parent Act since Section 3A did not contain any provision for the levy of interest. This contention was supported by the Supreme Court's decision in Shree Bhagwati Steel Rolling Mills vs. Commissioner of Central Excise, which held that interest could only be levied if explicitly provided for in the statute. The Revenue conceded this point, and the High Court agreed, stating that the Commissioner of Central Excise and the CESTAT were not justified in demanding and confirming the levy of interest. Consequently, the impugned orders demanding interest were quashed and set aside.

2. Confirmation of Demand Based on Annual Production Capacity:
The second issue was whether the confirmation of demand by the Tribunal, based on the annual production capacity determined by the Commissioner without considering power cuts, was perverse. The Appellant contended that the determination of production capacity did not account for severe power cuts, which was a relevant factor. However, the CESTAT noted that the Appellant had not challenged the determination of annual production capacity before it. The High Court found no reason to believe that the Appellant had challenged this determination, and since the Memo of Appeal was not produced, it concluded that the second substantial question of law did not arise or could not be decided in favor of the Assessee. The rulings in Bhuwalka Steel Industries Limited vs. Union of India and Shree Bhagwati Steel Rolling Mills were deemed inapplicable as there was no challenge to the determination of production capacity.

3. Denial of Abatement under Section 3A(3):
The third issue was whether the denial of abatement under Section 3A(3) was justified despite the Appellant's claim of restricted supply due to power cuts. Rule 96ZO(2) outlines the conditions for claiming abatement, including informing the authorities about the closure, providing electricity meter readings, and declaring the factory's closure period. The High Court found no evidence that the Appellant had fulfilled these conditions or followed the prescribed procedure. Therefore, the denial of abatement was upheld, and the third substantial question of law was answered against the Assessee.

Conclusion:
The appeal was partly allowed. The impugned orders demanding and confirming the levy of interest were quashed, but the orders confirming the levy of excise duty were upheld. There was no order as to costs, and the Civil Application was disposed of accordingly.