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TMI Blog2011 (3) TMI 296X X X X Extracts X X X X X X X X Extracts X X X X ..... r-I. By the impugned order, the penalty which was imposed by the adjudicating authority in both the matters was reduced to total amount of Rs.8 lakhs. The adjudicating authority by two separate orders dated 7.3.2002 and had in one case imposed penalty of Rs.1,14,24,930/- and in another case, penalty of Rs.17,16,340/-. Being aggrieved, the respondents filed appeals before the Commissioner (Appeals) which came to be allowed as stated above. 3. The respondents are engaged in the manufacture of M.S. CTD Bars classifiable under sub-heading 7214.90 and 7207.90 of the schedule to the Central Excise Tariff Act, 1985. At the material time, the respondents were discharging duty under compounded levy scheme on the basis of Annual Capacity of Production and Induction Furnace Annual Capacity Determination Rules, 1997. The annual capacity of production of the respondents was determined by the Commissioner under order dated 30.9.1997 which was re-determined pursuant to the application of the respondents dated 30.7.1998 by a fresh order dated 16.12.98. Accordingly, the respondents were required to pay Rs.6,85,800/- per month upto 11.9.98 and @ Rs.3,63,267/- per month with effect from 12.9.98, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loys Metals Pvt. Ltd. Case and it has been held that there cannot be equal amount of penalty without mens rea being established. 7. The relevant provisions of law in the matter read thus Provided also that where a manufacturer, fails to pay the whole of the amount payable for the month by 10th day of such month he shall be liable to , - (i) pay the outstanding amount along with interest thereon at the rate of 18% per annum, calculated for the period from 1st day of such month till the date of actual payment of the outstanding amount; and (ii) a penalty equal to the amount of duty outstanding from 1st day of such month or Rs.5000/- whichever is greater. 8. The provision of law as it stands came up for consideration before the Apex Court in Dharamendra Textile Processors and it was observed thus 12.?The stand of learned counsel for the assessee is that the absence of specific reference to mens rea is a case of casus omissus. If the contention of learned counsel for the assessee is accepted that the use of the expression assessee shall be liable proves the existence of discretion, it would lead to a very absurd result. In fact in the same provision there is an expres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts, one by 15th of the month for which it pertains to, and another by 1st of the succeeding month. If one fails to pay the same accordingly, then the amount becomes outstanding. If both the instalments are not paid by 1st of succeeding month, then whole of the amount payable for that month becomes outstanding for that month and penalty would be payable equal to whole of the outstanding amount for the month. Subsequent payment will not be of any consequence for the purpose of penalty amount. 11.?The expression outstanding amount of duty is proceeded by the word such . The first expression refers to whole of the amount falling due and payable for every month. Being so, as rightly pointed out by the learned DR, the penalty liability will have to be considered on the basis of the duty liability which falls due and payable and where the default occurs in that regard. Merely because part of the duty is paid subsequently it will not amount to full and final discharge of liability as regards the obligation to suffer the penalty for failure to comply with the obligation under the said scheme. Considering the decision of the Apex Court in Dharamendra Textile Processors case, therefore, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e extent of providing for mandatory minimum penalty without any mens rea and without any element of discretion is excessive and unreasonable restriction on fundamental rights and is arbitrary. Moreover, exercise of such power by way of subordinate legislation is not permissible when rule making authority for levying penalty is limited to default with intent to evade duty . 12. In view of what has been held by the Punjab Haryana High Court, it is clear that the provision in relation to the penalty on account of default in payment of duty within prescribed period is not to be dealt with as a matter of course nor the authorities lack discretion in quantifying the penalty amount. It is another thing in case where the Department is able to establish the presence of mens rea in relation to default committed by the assessee, however, in the absence of such mens rea being established the authorities do have discretion in quantifying the penalty amount. Undoubtedly, the discretion will have to be exercised judiciously depending upon the facts and circumstances of the case. The discretion in this regard also cannot be construed to be unlimited or unguided. 13. In other words while ..... X X X X Extracts X X X X X X X X Extracts X X X X
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