2009 (11) TMI 486 - AT - Central Excise

Penalty - This appeal arises from order passed by the Commissioner (Appeals), Meerut, by allowing the respondents Appeal and the penalty of equal amount of duty imposed by the Additional Commissioner under its order dated 27th March, 2003 was modified and reduced to Rs. 10,000/-. Held that - the Commissioner (Appeals) erred in reducing the penalty to Rs. 10,000/-. The Commissioner (Appeals) having found that there was default in payment of duty to the tune of Rs. 3,77,778/-, had no discretion or option to modify the penalty and the same ought to have been in accordance with the provisions of law which require penalty equal to the duty amount. The order in that regard, therefore, cannot be sustained and is liable to be set aside and the penalty to be quantified to Rs. 3,77,778/- for the reasons stated above. Therefore, allow the appeal in the above terms and dismiss the cross-objections.

Issues Involved:
1. Short payment of duty by the respondents.
2. Imposition and reduction of penalty.
3. Jurisdiction and authority to impose penalty.
4. Interpretation of Finance Act, 2001, and its impact on penalty imposition.
5. Applicability of abatement claims.

Detailed Analysis:

1. Short Payment of Duty by the Respondents:
The respondents, engaged in manufacturing M.S. Ingots under Chapter sub-heading 7206.90 of the Central Excise Tariff Act, 1985, were working under the Compounded Levy Scheme from 1-9-1997. They were required to pay Central Excise Duty based on their annual capacity of production, fixed at 12800 M.T. per annum with a duty liability of Rs. 6,66,667/- per month. A show cause notice dated 8th December, 1999, was issued for short payment of duty amounting to Rs. 11,39,784/- for the period from 1st July, 1999 to 30th September, 1999. The Additional Commissioner confirmed the demand and imposed a penalty equal to the duty amount, along with interest.

2. Imposition and Reduction of Penalty:
The Commissioner (Appeals) modified the penalty imposed by the Additional Commissioner from an amount equal to the duty to Rs. 10,000/-. The learned DR contended that the penalty should not have been reduced and should be equal to the defaulted amount of duty, citing the case of Union of India v. Dharamendra Textile Processors, which mandates strict adherence to the penalty provisions. The respondents argued that the abatement claim for the period from 11th August, 1999 to 13th September, 1999, amounting to Rs. 7,55,556/-, was pending and should have been considered before imposing any penalty.

3. Jurisdiction and Authority to Impose Penalty:
The respondents contended that, in light of the Finance Act, 2001, and the explanation to Section 132, the authority lacked jurisdiction to impose penalties for actions prior to the enforcement of the said Act. The explanation clause to Section 132 states that no act or omission shall be punishable as an offence if it was not so punishable before the section came into force. The Tribunal clarified that this explanation pertains to criminal offences and not civil liabilities like penalty for non-payment of duty.

4. Interpretation of Finance Act, 2001, and Its Impact on Penalty Imposition:
The Tribunal analyzed the explanation clause to Section 132 of the Finance Act, 2001, and concluded that it does not affect the imposition of penalties for civil wrongs such as non-payment of duty. The explanation clause reiterates the mandate of Article 20(1) of the Constitution, which prevents retrospective criminal liability but does not apply to civil penalties. The Tribunal referenced the Supreme Court's decision in Kolhapur Canesugar Works Ltd., which held that pending proceedings under repealed provisions would not lapse if there is a saving clause or if Section 6 of the General Clauses Act applies.

5. Applicability of Abatement Claims:
The Tribunal noted that the abatement claim was for a period prior to the default in duty payment (10th August, 1999 to 13th September, 1999), while the default occurred from 14th September, 1999 to 30th September, 1999. Therefore, the abatement claim did not coincide with the period of default and could not be used to justify a reduction in penalty.

Conclusion:
The Tribunal concluded that the Commissioner (Appeals) erred in reducing the penalty to Rs. 10,000/-. The penalty should be equal to the defaulted duty amount of Rs. 3,77,778/-. The appeal was allowed, and the cross-objections were dismissed. The Tribunal emphasized that the power to impose penalties for non-payment of duty was valid and not affected by the Finance Act, 2001.

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