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TMI Blog2012 (11) TMI 954X X X X Extracts X X X X X X X X Extracts X X X X ..... n-original dated 1st January, 2002 passed by the Deputy Commissioner, Central Excise, Division-II, Ahmedabad-I insofar as the same imposes penalty under Rule 96ZQ(5)(ii) of the Rules. 3. In Special Civil Application No. 3637 of 2004, the petitioner has challenged the order-in-original No. 41-45/D/2003 dated 31st December, 2003 passed by the Deputy Commissioner of Central Excise, confirming total demand of Rs.12,45,370/- under Rule 96ZP(3) of the Central Excise Rules, 1944 and imposing equal amount of penalty as well as interest at the appropriate rate on the confirmed amount under Rule 96ZP(3) of the Rules. 4. In Special Civil Application No. 6779 of 2003, the petitioners have challenged Order-in-Original No. SRT-VI/Adj-778/2001-0A dated 30th October, 2001 passed by the Deputy Commissioner of Central Excise & Customs insofar as imposition of penalty equal to the amount of duty amounting to Rs. 6,00,000/- (rupees six lakhs) under Rule 96ZQ(5)(ii) read with Rule 173Q(1) of the Rules on the petitioners is concerned. 5. Thus all the three petitions challenge levy of penalty equal to the amount of duty under Rule 96ZQ(5)(ii)/96ZP(3) of the Rules, whereas the petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f July, 2000 for which the due date specified was 15th July, 2000 made payment of Rs. 5 lakhs on 19th July, 2000, after a delay of about four days. In respect of the second fortnight of September, 2000, for which the due date specified, was 30th September, 2000, duty of Rs. 9 lakhs came to be paid on 3rd October, 2000. A show-cause notice dated 4th October, 2001 came to be issued to the petitioner firm for violation of the provisions of Rule 96ZQ(3) read with Rule 173G of the Rules calling upon the petitioners to show cause as to why penalty of Rs. 14 lakhs should not be imposed upon them under Rule 96ZQ(5)(ii) and interest at the rate of 24% per annum calculated for the outstanding period on the outstanding amount as per Rule 96ZQ(5)(ii) of the Rules should not be recovered. The petitioner firm submitted its reply dated 8th November, 2001 explaining that they were supposed to pay 50% of their excise liability by 15th July, 2000 but by the 13th of that month, there was a heavy downpour of water which lasted for nearly twenty four hours which was well published in the newspapers and known to all. The water caused heavy logging at almost all places and their factory was also flooded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt depending upon the facts and circumstances of each case. The court, accordingly, allowed the petition by quashing and setting aside the impugned order-in-original insofar as the same imposed penalty under Rule 96ZQ(5)(ii) of the Rules and remanded the matter to the authorities. It was further observed that the remaining portions of the impugned order are not interfered with, for the simple reason that the petitioners have preferred appeals for challenging the other portions of the order levying duty and interest. The respondents herein carried the aforesaid judgment and order passed by this court in appeal before the Supreme Court. The Supreme Court in the case of Union of India and Others v. M/s. Krishna Processors and Another [2009 (237) E.L.T. 641 (S.C.)] held that in view of the decision of the Union of India v. Dharamendra Textile Processors, 2008 (231) E.L.T. 3 (S.C.), Rule 96ZQ is mandatory. The court held that the consequence of the said judgment in Dharamendra Textile Processors is that the challenge to the vires of Rule 96ZQ(5)(ii) in the original writ petition before the High Courts stands revived. The Supreme Court, accordingly, remitted the entire batch of civil app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Delhi High Court, which came to be admitted by an order dated 28th December, 1997, whereby the interim relief was also granted in favour of those petitioners. Against the said decision of the Delhi High Court, the Union of India preferred appeal before the Supreme Court. Considering the fact that the matter involved great public importance and affected interest of manufacturers throughout the country, by an order dated 3rd March, 1998, the Supreme Court transferred all the petitions before it. In the said matters, the Supreme Court passed an interim order dated 21st April, 1998 in Civil Appeals No. 52 to 63 of 1998 in the following terms :- "While the matters are pending in this court, the Union Government shall not take any penal or coercive measures under the notification No.07/98 - Central Excise (N.T.) dated March 10, 1998. It will be open to the manufacturers to submit application on the basis of the actual production and, if any such application is submitted the same shall be duly considered by the competent authority in accordance with the rules." 7.3 During the pendency of the above referred proceedings, the petitioners were also following the procedure prescribed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioners were not legally obliged to pay any duties on the basis of the APC when the actual production capacity and the actual production were much lower than the APC. It appears that five show cause notices covering the period from 1st September, 1997 to 31st March, 2000 were issued to the petitioners proposing to recover various amounts of compounded levy on the ground that the petitioners had not discharged duty liability in accordance with the APC and duty liability as determined by the Department. 7.6 In response to the show cause notices, the petitioners filed reply to the effect that the issue of the validity of Compounded Levy Scheme was pending before the Supreme Court and therefore, adjudication be kept in abeyance. The petitioners also challenged the compounded levy scheme and recovery being proposed thereunder before this Court by way of a writ petition being Special Civil Application No. 11931 of 2000. During the pendency of these show cause notices, the Supreme Court decided the controversy about Section 3A of the Act and the Compounded Levy thereunder in a group of cases between the Union of India v. Supreme Steels and General Mills and Others, 2001 (47) RLT 129 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learing on 15th May, 1999 and the credit was confirmed on 18th May, 1999, since intervening days were holidays for the Bank. Thus, though the instruction was given by the petitioners to Prime Bank Limited on 13th May, 1999 for diverting the funds, cheque was presented for clearance through Bank of Baroda on 15th May, 1999. Since it had come to the knowledge of the petitioners that the amount of Rs. 6 lakhs was credited by Bank of Baroda in the Govt. account only on 18th May, 1999, the petitioners by way of abundant caution also paid interest amount of Rs.1800/- and intimated the same to the Department. 8.2 Despite this, the Superintendent of Central Excise, Range-I, Division-VI issued a Show Cause Notice bearing F.No.AR-III/SCN-96ZQ/Rita/99 dated 29th November, 1999 calling upon the petitioner company to show cause as to why penalty equal to the duty of Rs. 6,00,000/- should not be imposed under Rule 96ZQ(5)(ii) of the Rules. The petitioners filed a detailed reply on 29th December, 2000 explaining the position and informing the Deputy Commissioner-respondent No. 2 herein that the petitioners have already instructed their Bankers - Prime Co-operative Bank Ltd. on 13th May, 199 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... came to be inserted in the Act with effect from 14th May, 1997. The said section provides that notwithstanding anything contained in Section 3, where the Central Government having regard to the nature of the process of manufacture or production of excisable goods of any specified description, the extent of evasion of duty in regard to such goods or such factors as may be relevant, is of the opinion that it is necessary to safeguard the interest of revenue, specify, by notification in the Official Gazette, such goods as notified goods and there shall be levied and collected duty of excise on such goods in accordance with the provisions of this section. In exercise of powers under Section 3A of the Act, the Central Government issued notification notifying the Hot Air Stenter Independent Textile Processor Annual Capacity Determination Rules, 1998. The goods manufactured by the petitioners came to be notified as goods on which duty was to be levied and collected as prescribed under Section 3A of the Act. Thus by a legal fiction, Section 3A became the charging event in respect of goods notified under sub-section (2) of Section 3A of the Act. The Central Government also inserted Rule 96Z ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he aforesaid provisions came to be omitted, and hence continuance of the proceedings after the said provisions came to be omitted was without any authority of law. Similarly in the case of the petitioners in Special Civil Application No. 6779 of 2003, the show cause notice came to be issued on 20th November, 1999, but the impugned order came to be passed on 30th October, 2001 after the aforesaid provisions came to be omitted and as such was without authority of law. In support of his submission, the learned advocate placed reliance upon the decision of this court in the case of Amit Processors Pvt. Ltd. v. Union of India and Others, 1985 (21) E.L.T. 24 (Guj.) wherein this court while considering as to whether Rule 10 and 10A of the Central Excise Rules which came to be omitted without any saving clause, held that the court was concerned with omission of a rule and not a Central Act or Regulation and, therefore, looking to the decision of the Supreme Court in the case of M/s. Rayala Corporation (P) Ltd. v. Director of Enforcement, AIR 1970 SC 494, it is clear that Section 6 of the General Clauses Act cannot be pressed into service. When Section 6 of the General Clauses Act cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted that when Section 3A of the Act was omitted on 11th May, 2001 by virtue of Section 121 of the Finance Act, 2001, all the provisions like the rules made thereunder and the action initiated under such rules also stood lapsed. Reference was made to the decision of the Supreme Court in Air India v. Union of India, (1995) 4 SCC 734, wherein it has been held that if subordinate legislation is to survive the repeal of its parent statute, the repealing statute must say so in so many words and by mentioning the title of the subordinate legislation. It was held that that when the parent provision is omitted, all the provisions like rules and regulations made thereunder, would also not survive. The learned counsel pointed out that no such provision for survival or continuation of proceedings initiated under Rules 96ZO, 96ZP and 96ZQ is made while omitting Section 3A of the Act which is the parent provision for these rules. Under the circumstances, no penalty could be imposed and no interest could be charged in case of the petitioners, because the case against the petitioners had not been brought to finality before omission of the above provisions. 10.6 The next contention raised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case and thus, penalty which is penal in character is provided under this rule even without any action on the part of the assessee inviting any penal consequences. In view of the provisions of Rule 96ZQ(5)(i) which are compensatory in nature, Rule 96ZQ(5)(ii) becomes onerous and wholly unjustified. It was, accordingly, urged that this provision of Rule 96ZQ(5)(ii) which thus provides for penalty without there being any action on the part of an assessee justifying taking of any action penal in character, is therefore wholly illegal and in violation of Article 14 of the Constitution of India. 10.8 Next it was contended that there is a basic inconsistency in Rule 96ZQ(5)(ii) which shows the unreasonableness and arbitrariness underlying this provision. Rule 96ZQ(3) provides for payment of 50% of the amount by the fifteenth day of the month and the remaining amount by the end of the month. In case there is a default in paying the first instalment by the 15th day of the month, no penalty under Rule 96ZQ(5)(ii) is leviable, and only interest under Rule 96ZQ(5)(i) is recovered as a compensatory measure. However, in case of default in payment of the second instalment, not only compens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anufacturers of specified textile products, no other manufacturer of any other excisable goods is governed by a provision like Rule 96ZQ(5)(ii) of the Rules. Even the manufacturers of similar textile products, including fabrics, which are not specified under Section 3A of the Act are not governed by Rule 96ZQ(5)(ii) and are therefore, not liable for any like penalty under the Rules. It was submitted that there is no reasonable classification between manufacturers of specified textile products and manufacturers of other excisable goods and therefore, the impugned rule which subjects only the manufacturers like the petitioners to discriminatory treatment is wholly unconstitutional and liable to be struck down. Reliance was placed upon the decision of the Supreme Court in the case of State of Kerala v. Haji K. Kutty Naha, (1969) 1 SCR 645, as well as in the case of Special Courts Bill, 1978, In re, (1979) 1 SCC 380, wherein the court had laid down propositions applicable to cases arising under Article 14 of the Constitution. It was, inter alia, laid down that the principle underlying the guarantee of Article 14 is not that the same rules or law should be applicable to all persons with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ental right of conducting business without unreasonable restrictions. As has happened in various cases, the manufacturers would be liable for an astronomical amount of penalty only because of a minor delay of three/four days, which amounts to unreasonable restriction on the petitioners' right to conduct business. The liability of penalty under the impugned rule is undoubtedly onerous and therefore it deserves to be struck down as violative of Article 19(1)(g) of the Constitution of India. In support of his submissions, the learned advocate placed reliance upon the decision of the Punjab & Haryana High Court in the case of Bansal Alloys & Metals Pvt. Ltd. v. Union of India, 2010 (260) E.L.T. 343 (P & H) wherein the court has struck down Rules 96ZO, 96ZP and 96ZQ to the extent the same permit minimum penalty for delay in payment without any discretion and without having regard to extent and circumstances for delay as ultra vires the Act and the Constitution. It was submitted that the said decision would be squarely applicable to the facts of the present case and that the provision of Rule 5(ii) of Rule 96ZQ of the Rules is required to be struck down as being unconstitutional. 10.12& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not merely consequential to assessment. It is not merely machinery. Penalty is in addition to tax and is a liability under the Act. Reliance was placed upon the decision of the Supreme Court in the case of Collector of Central Excise, Ahmedabad v. Orient Fabrics (P) Ltd., (2004) 1 SCC 597 = 2003 (158) E.L.T. 545 (S.C.), wherein the court affirmed the decision of the Delhi High Court in the case of Pioneer Silk Mills Ltd. [1995 (80) E.L.T. 507 (Del.) wherein it was held that when penalty is additional tax, constitutional mandate requires a clear authority of law for imposition thereof. 10.15 Referring to Section 38A of the Act, which came to be inserted in the statute book by Section 131 of Act 14 of 2001 with effect from 28th February, 1944, it was submitted that the said section applies only in respect of rules, notifications or orders and does not apply to any section. According to the learned advocate Section 3A is the mother provision under which the other rules came to be framed. Section 3A came to be omitted in 2001 and is not saved by Section 38A of the Act. Moreover, Section 38A speaks of a rule being amended, repealed, superseded and rescinded and does not speak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he said case observed that the scheme had since been dropped. The court disposed of the bunch of cases comprising of civil appeals, special leave petitions and writ petitions relating to charge of excise duty on notified goods on the basis of capacity of production, as introduced by Section 3A of the Act, by holding that no dispute thus remained on the point and the excise duty shall accordingly be assessed in respect of matters not yet closed and still pending before the concerned authorities. It was submitted that in the light of the aforesaid decision of the Supreme Court, it is not open for the petitioners to contend that the liability of the petitioners to pay duty stands totally obliterated in view of the omission of Rule 96ZQ of the Rules and Section 3A of the Act. According to the learned counsel, considering the knowledge or the information given to the court regarding the provision which was no more on the statute book, the Supreme Court thought it appropriate to direct the parties to go before the appropriate authority in all pending cases. This would mean that the Supreme Court considered those provisions for removal of the section and rules and was of the opinion that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be done before such amendment". The Tribunal further held that there cannot be a greater all pervasive saving clause than Section 38A. When, admittedly, the obligations and liabilities were incurred under Rules 96ZO and 96ZP, during their currency when Section 3A was still in force, amendments by omission, repeal etc. contemplated by Section 38A did not affect such liabilities, and the investigation, legal proceeding or remedies in respect thereof were all saved. The Tribunal further held that the liabilities were admittedly incurred by the appellants under Rules 96ZO and 96ZP while Section 3A was in force. The subsequent omission of Section 3A from 11th May, 2001 did not obliterate the obligations and liabilities which had already arisen under the rules and were saved because of the saving provisions contained in Section 38A of the Act. The obligations and liabilities had arisen under the said rules as contemplated by Section 3A when it was in force and those very obligations and liabilities subsisted by virtue of the saving provision of Section 38A which was simultaneously introduced while omitting Section 3A. The omission of Section 3A was not done with any retrospective eff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atutes. Adverting to the provisions of Section 6A of the General Clauses Act in which it is stated that if any Act repeals any enactment making textual amendment in the Act by express omission, insertion or substitution of any matter, then, unless a different intention appears, the repeal shall not affect the continuance of such amendment made by an enactment so repealed and in operation at the time of such repeal; that the use of the words "repeals by express omission, insertion or substitution" will cover different aspects of repeal; that this is a further legislative indication that "omission" also amounts to a "repeal" of an enactment. Reliance was placed upon the decision of the Supreme Court in the case of General Finance Co. and Another v. Assistant Commissioner of Income Tax, Punjab, (2002) 7 SCC 1, wherein the court had found force in the aforesaid submissions advanced by the learned counsel for the appellant therein. 12. Mr. Y. N. Ravani, learned Senior Standing Counsel appearing on behalf of the respondents in Special Civil Application No. 1984 of 2002 reiterated the submissions advanced by Mr. Darshan Parikh. It was further submitted that the contention as regards ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Act. It was submitted that penalty is a civil liability and as such, penalty can be imposed for loss of revenue and wilful and intentional delay is not necessary. Reliance was also placed upon the decision of the Supreme Court in Commissioner of Income-tax, Delhi v. Atul Mohan Bindal, (2009) 9 SCC 589, wherein it has been held that the decision in Dharamendra Textile (supra) must be understood to mean that though the application of Section 11AC would depend upon the existence or otherwise of the conditions expressly stated in the Section, once the Section is applicable in a case the authority concerned would have no discretion in quantifying the amount and penalty must be imposed equal to the duty determined under sub-section (2) of Section 11A. 12.3 It was pointed out that Section 3A of the Act is a special provision and provides for a different procedure than Section 3 of the Act which is the charging provision. Under Section 3A of the Act which is intended to charge duty on the basis of annual production capacity, the important aspect is that the same involves pre-determination of duty whereas in other cases, the liability arises on manufacture. It was submitted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount is not paid, it becomes difficult for the Government to run the administration. Therefore, this provision is to be invoked when the revenue is not paid by the assessee in time. The aforesaid two clauses operate in different fields and it is known that compensatory measures as well as measures for deterrent effect can be provided. The court found no difficulty in arriving at the conclusion that it is not possible to provide compensatory measures as well as measures which would deter the assessees. It was submitted that it is settled legal position that while considering the validity of a statutory provision the presumption is always in favour of its constitutionality. It was submitted that Section 3A of the Act was brought on the statute book with an intention to collect tax on production basis and to collect the same within time. The said provision was enacted in the interest of the revenue. It was intended to avoid a situation of evasion of tax and to provide timely collection of duty. Both purposes can be achieved by imposing penalty to create deterrence for committing default and therefore provision for imposition of penalty has a direct nexus with enacting Section 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t violative of Article 14 or of any other provision of the Constitution or the Act and as such, deserve to be sustained. 13. Mr. R. J. Oza, learned Senior Standing Counsel, appearing on behalf of the respondents in Special Civil Application 6779 of 2003 adopted the submissions advanced by Mr. Darshan Parikh. 14. In rejoinder, Mr. Paresh Dave, learned advocate for the petitioners submitted that in the case of Union of India v. Supreme Steels and General Mills (supra) the issue of proceedings continuing or not had not been raised, considered or decided by the Supreme Court. It was a direction on consensus. It was submitted that it was a sort of a consent decree and as such, the same is not a decision binding as an authority. In support of his submission, the learned advocate placed reliance upon the decision of the Supreme Court in the case of Kulwant Kaur v. Gurdial Singh Mann, (2001) 4 SCC 262, wherein the court held that concession, if made and in the event the court proceeds on the basis of such a concession, the decision cannot by any stretch be termed as a binding precedent. The court in the facts of the said case held that the previous decision did not and cannot h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the scheme of Section 3A and Section 3 of the Act would be different. It was contended that pre-determining of liability is not a relevant consideration for imposition of penalty. It was argued that even otherwise, the statement is factually incorrect. Attention was invited to the provisions of Rule 173G of the Rules which lays down the procedure to be followed by the assessee in the normal course. It was submitted that under sub-rule (1) of Rule 96ZQ, goods and rates are specified whereas sub-rule (3) provides for payment of 50% of the duty by 15th and the remaining by the end of the month. Under the normal scheme, Chapter 7A of the Rules provides for removal of excisable goods on determination of duty by producers, manufacturers or private warehouse licensees. Attention was invited to the notification issued in exercise of powers conferred by Rule 173A of the Rules specifying the goods to which the provisions of sub-rule (1) of Chapter 7A of the Rules shall apply. It was pointed out that most of the goods are covered under Chapter 7A and that all goods except cigarettes have been brought under the self-removal procedure. Attention was invited to Rule 173B of the Rules and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. Union of India (supra) concludes the issue, it was submitted that in the said case the court never dealt with the aspect of vires of Rule 96ZQ and the rule was read down. It was further submitted that the decision of this court in Ambuja Synthetic Mills v. Union of India has been quashed and set aside in the case of Dharamendra Textile Processors and as such, no reliance can be placed upon the same by the Revenue. Reliance was placed upon the decision of this High Court in the case of Satellite Engineering Ltd. v. Assistant Collector of Central Excise, 1992 (58) E.L.T. 503 (Guj.), for the proposition that once a decision is reversed and set aside, it is immaterial on which point the decision is reversed because on reversion of the decision, it ceases to be a good decision in the eye of law. As regards the decision of the Punjab & Haryana High Court in the case of Shree Bhagwati Steel Rolling Mills (supra) it was pointed out that in the said decision the court had observed that the decision of the Supreme Court in Kolhapur Canesugar was in respect of a temporary statute which is an incorrect fact, and as such there is a complete misreading of the said decision. It was submitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es for debiting the duty payable under sub-rule (1) in the current account maintained by the independent processor under sub-rule (1) of Rule 173G of the Rules. Sub-rule (3) says that 50% of the amount of duty payable for a calendar month under sub-rule (1) shall be paid by the 15th of the month and the remaining amount shall be paid by the end of that month. Sub-rule (4) makes provision for maintaining records etc. Sub-rule (5) which makes provision for payment of interest and penalty is in two parts. The first part provides for payment of interest at the rate of 24% per annum for the outstanding period on the outstanding amount if an independent processor fails to pay the amount of duty or any part thereof by the date specified in sub-rule (3); whereas the second part provides for payment of penalty equal to the amount of duty or Rs. 5000/-, whichever is greater, in case of default in making payment in terms of sub-rule (3). In Special Civil Application No. 1984 of 2002, the Superintendent of Central Excise issued a show-cause notice on 4th October, 2001, that is, after Rule 96ZQ came to be deleted. In the other two writ petitions the show cause notices came to be issued prior to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation or order so amended, repealed, superseded or rescinded; or (e) affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid. and any such investigation, legal proceeding or remedy may be instituted, continued or enforced and any such penalty, forfeiture or punishment may be imposed as if the rule, notification or order, as the case may be, had not been amended, repealed, superseded or rescinded. 16.2 At this juncture it may be germane to refer to the decision of the Supreme Court in the case of M/s. Rayala Corporation Pvt. Ltd. v. Director of Enforcement, New Delhi (supra), wherein the court was dealing with a question whether proceedings could be validly continued on the complaint in respect of the charge under Section 132-A(4) of the Defence of India Rules, 1962. By the Defence of India (Amendment) Rules, 1965, Rule 132A came to be deleted in the following terms :- "In the Defence of India Rules, 1962, Rule 132-A (relating to prohibition of dealings in foreign exchange) shall be omitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng could be instituted even after the repeal of the Act in respect of an offence committed during the time when the Act was in force. The court noted that the notification of the Ministry of Home Affairs omitting Rule 132-A of the Defence of India Rules did not make any such provision similar to that contained in Section 6 of the General Clauses Act. The court observed that consequently, it is clear that, after the omission of Rule 132-A of the Defence of India Rules, no prosecution could be instituted even in respect of an act which was an offence when the rule was in force. The court further observed that when Section 4(1) of the Act was amended, the Legislature did not make any provision that an offence previously committed under Rule 132-A of the Defence of India Rules would continue to remain punishable as an offence of contravention of Section 4(1) of the Act, nor was any provision made permitting operation of Rule 132-A itself so as to permit institution of prosecutions in respect of such offences. It was held that the consequence is that the complaint was incompetent even in respect of the offence under Rule 132-A(4). 16.3 Examining the facts of the present cases in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law. The court was of the considered view that in such a case the court is to look to the provisions in the rule which has been introduced after the omission of the previous rule to determine whether a pending proceeding will continue or lapse. If there is a provision therein that pending proceedings will continue and be disposed of under the old rule, as if the rule has not been deleted or omitted, then such proceeding will continue. If the case is covered by Section 6 of the General Clauses Act or there is a pari materia provision in the statute under which the rule has been framed, in that case also, the pending proceedings will not be affected by omission of the rule. In the absence of any such provision in the statute or in the rule, the pending proceedings would lapse on the rule under which the notice was issued or proceedings were initiated being deleted/omitted. The court held that the position is well known that at common law, the normal effect of repealing a statute or deleting a provision is to obliterate it from the statute book as completely as if it had never been passed, and the statute must be considered as law that never existed. To this rule, an exception is engr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n is not disclosed accurately and collection of excise on their production capacity is thought of as appropriate. Under the scheme evolved in this provision the annual production capacity of mills and furnaces is determined by the Commissioner of Central Excise in terms of the rules to be framed under Section 3A(2) of the Act by the Central Government. Thereafter, the assessee would be liable to pay duty based on such determination. 17.2 Rule 96ZQ of the Rules which provides for procedure to be followed by independent processors of textile fabrics, comes into play after the Commissioner of Central Excise determines the annual capacity of production on processed textile fabrics under Section 3A of the Act read with the Hot Air Stenter Independent Textile Processors Annual Capacity Determination Rules, 1998. Rule 96ZQ proceeds to lay down the manner of payment of duty, payment of interest/penalty and such other incidental matters. Section 3A has been omitted by the Finance Act, 2001 with effect from 11th May, 2001 without any saving clause. On behalf of the Revenue, reliance had been placed upon the decision of the Supreme Court in the case of General Finance Company v. Assista ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation in the present case. The decision of the Supreme Court in General Finance Company Ltd. (supra), therefore, does not carry the case of the Revenue any further. 17.4 Thus, any obligation or liability etc. acquired, accrued or incurred under Section 3A of the Act would not be saved by Section 6 of the General Clauses Act. The next question that arises for consideration is as to whether after the omission of Section 3A of the Act with effect from 11th May, 2001 proceedings initiated under Rules 96ZQ, 96ZP and 96ZO of the Rules would survive, or in other words what would be the position of obligations or liabilities incurred under Rules 96ZQ, 96ZP and 96ZO of the Rules after the omission of Section 3A. As noticed earlier, Rule 96ZQ of the Rules only lays down the procedure to be followed by the independent processor of textile fabrics, the manner of payment of duty and the consequences of non-payment of duty within the prescribed period, etc. Likewise, is the case with Rules 96ZP and 96ZO of the Rules. Rules 96ZQ, 96ZP and 96ZO are not the charging provisions. The charging provision is Section 3A of the Act and Rules 96ZQ etc. are merely machinery provisions. Thus, any liabi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded or rescinded. Section 38 does not speak of giving protection to any right, privilege, obligation, liability acquired, accrued or incurred under any rule, notification or order; or any investigation, legal proceeding or remedy etc., in case the rule has been omitted. Thus, Section 38A would not protect any right, privilege, obligation or liability acquired, accrued or incurred, or any investigation, legal proceeding, remedy in respect of such right, privilege, obligation, liability etc. under Section 3A for two reasons, viz., (a) Section 38A only protects any right, liability etc., acquired, accrued or incurred under any rule, notification or order and not under any section; and (b) Section 38A governs only repeal, amendment etc. and not omission. Thus, Section 38A of the Act would in no manner save obligations or liabilities incurred under Section 3A of the Act. 18.3 In the light of the aforesaid discussion, this court is of the view that upon the omission of Rules 96ZQ, 96ZP and 96ZO from the statute book on 1st March, 2001, no action could thereafter have been initiated thereunder. However, in view of the fact that the notification dated 1st March, 2001 amends the Centr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otification or order made or issued under the Act. The same does not save any action taken or rights and liabilities accrued under any provision of the Act. Thus, Section 3A stands unconditionally omitted from the statute book without any saving clause in favour of pending proceedings. All actions thereunder must, therefore, stop at the stage where they were when the provision came to be omitted, and if the proceedings had not been concluded before the omission came into effect, the same cannot be concluded thereafter. 19.1 In the facts of the present case, as noticed earlier, in Special Civil Application No. 1984 of 2002, the show-cause notice itself has been issued on 4th October, 2001, that is, after the omission of Rules 96ZQ, 96ZO and 96ZP of the Rules whereas in the other two writ petitions the show cause notice had been issued prior to omission of said rules, however, the proceedings had not been concluded prior to the omission of Section 3A of the Act. Insofar as intitiation of proceedings after omission of the Rule 96ZQ, 96ZP and 96ZO is concerned, as held hereinabove, the same is not saved by the notification dated 1st March, 2001 whereby the said rules came to be o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3) Fifty per cent of the amount of duty payable for a calendar month under sub-rule (1) shall be paid by the 15th of the month and the remaining amount shall be paid by the end of that month. (4) The independent processor shall continue to maintain records, and file returns, pertaining to production, clearance, manufacturing, storage, delivery or disposal of goods, including the materials received for or consumed in, the manufacture of excisable goods or other goods, the goods and materials in stock with him and the duty paid by him, as prescribed under the Central Excise Rules, 1944 and the notifications issued thereunder. (5) If an independent processor fails to pay the amount of duty or any part thereof by the date specified in sub-rule (3), he shall be liable to, - (i) pay the outstanding amount of duty along with interest at the rate of twenty-four per cent, per annum calculated for the outstanding period on the outstanding amount; and (ii) a penalty equal to an amount of duty outstanding from him at the end of such month or rupees five thousand, whichever is greater. 20.2 Sub-rule (1) of Rule 96ZQ lays down the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng from him. 20.4 Thus, in case an independent processor fails to pay the amount of duty outstanding from him at the end of any month, he is ipso facto liable to penalty equal to an amount of duty outstanding or Rs. 5,000/-, whichever is greater. The delay in payment may be of one day or a hundred days. Notwithstanding the extent of delay, the assessee would be liable to pay an equal amount of duty outstanding from him at the end of the month. Thus, the rule does not leave any discretion to the adjudicating authority as regards imposition or non-imposition of penalty as also regarding the amount of penalty to be imposed. In fact, the provision makes it obligatory on the part of the adjudicating authority to impose a penalty equal to an amount of duty outstanding from the assessee at the end of a particular month. Moreover, the penalty is required to be imposed merely in case of default in payment of the outstanding amount before the end of the month, even in absence of any dishonest or contumacious conduct on the part of the assessee. 20.5 In this regard, it may be pertinent to note that Rule 96ZQ has been framed in exercise of the power conferred by Section 37 of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or imposition thereof. The levy of penalty which is an additional tax has to be under authority of law which should be clear, specific and explicit. Adverting to the facts of the present case, Rule 96ZQ has been framed under Section 37 of the Act. Section 37 of the Act does not expressly authorise the Central Government to levy penalty which is an additional tax, greater than five thousand rupees. Sub-section (3) of Section 37 of the Act makes it explicit that in case no other penalty is provided under the Act, the Central Government may provide that any person committing a breach of any rule shall be liable to penalty not exceeding five thousand rupees. Thus, the power to levy penalty conferred on the Central Government under Section 37 of the Act is limited to an amount not exceeding rupees five thousand. The learned advocate for the petitioner, therefore, appears to be justified in contending that the imposition of penalty equal to the amount of duty is without authority of law. 20.7 The Supreme Court in the case of K.T. Moopil Nair v. State of Kerala (supra) has held thus :- "7. The most important question that arises for consideration in these cases, in view of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pen to the attack of inequality on the ground that the total burden resulting from such a classification is unequal. Similarly, different kinds of property may be subjected to different rates of taxation, but so long as there is a rational basis for the classification, Article 14 will not be in the way of such a classification resulting in unequal burdens on different classes of properties. But if the same class of property similarly situated is subjected to an incidence of taxation, which results in inequality, the law may be struck down as creating an inequality amongst holders of the same kind of property. It must, therefore, be held that a taxing statute is not wholly immune from attack on the ground that it infringes the equality clause in Article 14, though the courts are not concerned with the policy underlying a taxing statute or whether a particular tax could not have been imposed in a different way or in a way that the Court might think more just and equitable. The Act has, therefore, to be examined with reference to the attack based on Article 14 of the Constitution." 20.8 In Special Courts Bill, 1978, In re, (1979) 1 SCC 380, the Supreme Court stated various propo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f delay or the gravity of default on the part of the concerned assessee and proposes to treat all assessees equally. An assessee paying the second instalment after one day of the specified date and an assessee paying such amount after a hundred days of the specified date are treated equally, despite the fact that in the later case, the same would show deliberate default on the part of the concerned assessee. Thus, it is apparent that the rule treats unequals as equals, thereby violating Article 14 of the Constitution. 20.10 Another aspect of the matter is that except for the manufacturers of specified textile products and other manufacturers governed by Section 3A of the Act, no other manufacturer of any other excisable goods is governed by the provisions of Rule 96ZQ(5)(ii) of the Rules or similar provisions under Rule 96ZP. In case of any other manufacturer, the regular provisions of the Act would be applicable. 20.11 By way of illustration, the facts of the present case may be taken into consideration. The impugned order has been passed against the petitioners imposing penalty equal to the amount of duty on account of delay of three days in depositing the outstanding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by dint of the fact that the amount has been paid after a delay may be of even only one day, the assessee is liable to pay penalty equal to the amount of outstanding duty. There is no discretion vested in the adjudicating authority to reduce the amount of penalty. Thus, the provisions under Rule 96ZQ(5)(ii) of the Rules evidently are more onerous than the provisions of Section 11AC of the Act which make provision for levy of penalty in case of fraud, collusion, mis-statement etc. Thus, it is apparent that the rule operates to the prejudice of the assessees covered under the said rule namely, independent processors of textile fabrics. In the circumstances, clause (ii) of sub-rule (5) of Rule 96ZQ is clearly violative of Article 14 of the Constitution of India inasmuch as the same discriminates between two classes of persons namely, independent processors of textile fabrics and other manufacturers who are not covered by Rule 96ZQ. 20.13 On behalf of the petitioners, it has further been pointed out that in case of manufacturers who are not covered under Section 3A of the Act and have been discharging their duty liabilities under Section 3 of the Act read with the procedure pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question that arises for consideration is as to whether the decision of the Supreme Court in the case of Union of India v. Supreme Steels (supra) concludes the issue involved in the present case. A perusal of the aforesaid decision of the Supreme Court indicates that in the said batch of cases, vires of Rule 96ZO of the Central Excise Rules had been challenged on the ground that it is inconsistent with the provisions of the Act. Before the Supreme Court, the counsel for the parties had informed that the matter remained confined to a period of three years only as the scheme so introduced has since been dropped. The learned counsel appearing on behalf of the manufacturers stated that they do not challenge the validity of Section 3A of the Act. It was submitted that the excise duty may be charged according to the said provision, on the basis of actual production but for the period of whole year. On behalf of the Union of India, the learned counsel had submitted that there is no dispute with the offer made and also that the assessment shall be made for the whole period of one year namely, the financial year. The court observed that no dispute thus remained on the point and the excise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reme Steels (supra) and have acquiesced with the fact that the concerned authorities could decide the matters which are pending before them. It was submitted that in the circumstances, it is not permissible for the petitioners to now raise the contention regarding lack of jurisdiction on the part of the adjudicating authority once having taken shelter of the said decision of the Supreme Court. 21.2 In this regard, a perusal of the averments made in the petition indicates that the petitioners have sought to raise a new plea as regards lack of jurisdiction on the part of the adjudicating authority to adjudicate upon the show-cause notice on the ground that at the time when the impugned orders were actually passed, the provisions of Rules 96ZO, 96ZP and 96ZQ of the Rules and Section 3A of the Act stood deleted and as such, no orders could have been passed against the petitioners under the said provisions. In this regard it may be apposite to refer to the decision of the Supreme Court in the case of Union of India v. Sube Ram and Others, (1997) 9 SCC 69, wherein it has been held that in case the court has no jurisdiction, the decision of the court would be a nullity and the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt, it is only desirable that a litigant should not be shut out from raising such plea which goes to the root of the lis involved. 21.3 In the light of the principles enunciated in the above referred decisions of the Supreme Court, it is apparent that the plea sought to be raised by the petitioners is a jurisdictional issue and goes to the root of the case. In the circumstances, this court is of the view that it is permissible for the petitioners to challenge the validity of the impugned orders on the ground of lack of jurisdiction even at this stage, though the same had not been raised before the adjudicating authority. The contention that the petitioners had not only given up their challenge but had also not deliberately canvassed the same and as such, are estopped from raising such plea at this stage, does not merit acceptance inasmuch as the Supreme Court in the case of Chiranjilal Goenka (supra) has held that the defect of jurisdiction strikes at the very authority of the court to pass decree which cannot be cured by consent or waiver of the party. In the circumstances, the court is of the view that the decision of the Supreme Court in the case of Union of India v. Supr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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