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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 ..... of Section 3A of the Act, there was no power to proceed further and conclude the same. Under the circumstances, any action taken under Rules 96ZQ, 96ZO and 96ZP of the Rules after Section 3A of the Act came to be omitted from the statute book without any saving clause, would be without authority of law and as such any orders passed in respect thereof after the omission of Section 3A of the Act would be non est. Virus of penalty provision - held that:- manufacturers of goods specified under Section 3A of the Act are evidently subjected to harsh treatment of unreasonable penalty under Rule 96ZQ(5)(ii) compared to manufacturers of other excisable goods. Moreover, considering the nature of the penalty prescribed even for one day’s delay, it is apparent that the said provision would amount to imposition of an unreasonable restriction on the petitioners right to conduct business thereby rendering the said provision as violative of Article 19(1)(g) of the Constitution. - In the light of the above discussion, this court is of the view that clause (ii) of sub-rule (5) of Rule 96ZQ of the Rules is ultra vires Articles 14 and 19(1)(g) of the Constitution of India as well as Section 37 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 84 of 2002 have also challenged the constitutional validity of Rule 96ZQ(5)(ii) of the Rules. Facts : 6. Special Civil Application No. 1984 of 2002 : The petitioner firm is engaged in the activity of processing textile fabrics. The fabrics are covered under the Schedule to the Central Excise Tariff Act, 1985 and are, therefore, exigible to levy of Central Excise. The Central Government enacted Section 3A of the Central Excise Act, 1944 (hereinafter referred to as the Act ) under which power was conferred upon the Central Government to charge excise duty on the basis of capacity of production in respect of notified goods. With effect from 6th December, 1998, the textile fabrics produced by the petitioner company were notified for the purpose of Section 3A of the Act and accordingly, the excise duty on such notified textile fabrics became leviable and recoverable on the basis of the production capacity of manufacturers of textile fabrics. The Central Government issued various notifications and framed rules for determination of annual production capacity of the manufacturers of notified goods for implementing the scheme of Section 3A, popularly known as Compounded Levy Scheme. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hineries and electric motors were under 1.5 feet water. It took four days for them to clear the debris of rainwater and their production also was affected for four days. During the said period, their bankers also did not operate their business due to lack of staff who also suffered due to water-logging. So the operation of the bank started on 18th July, 2000 and they deposited the amount on the same day and challan was passed on 19th July, 2000. It was the case of the petitioners that it was not their intention to make the payment late. In respect of September, 2000, it was the case of the petitioners that they had deposited the amount of Rs. 9 lakhs on 29th September, 2000 and challan was also deposited. But, 30th September was half-year closing and it was closed for public transactions and the next working day was 3rd October, 2000. 1st October was a Sunday and 2nd October was a public holiday on account of Gandhi Jayanti. So the bankers put 3rd October, 2000 on TR-6 challan. The petitioners, accordingly, requested the Deputy Commissioner not to impose any penalty as per Rule 96ZQ(5) of the Rules and interest of 24 per cent as it was not their intention to make the payment late a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... question of vires of the above sub-rule. The court also granted liberty to the assessees to amend the writ petitions/appeals, if so advised. Further liberty was granted to both sides to complete their pleadings at the earliest before the High Court(s). This is how the matter stands revived and has come up for hearing before this court. 7. Special Civil Application No. 3637 of 2004 : 7.1 The facts of the case as appearing in the petition are that the petitioner is a partnership firm, inter alia, engaged in the business of manufacturing of steel products like round bars, etc. falling under Chapter 72 of the Schedule to the Central Excise Tariff Act, 1985. Section 3 of the Central Excise Act, 1944 provides for levy and collection of dues of excise on all excisable goods which are produced or manufactured in India. However, with effect from 14th May, 1997, the Union Government framed Section 3A under which the power to charge excise duty on the basis of capacity of production in respect of goods notified under the said Section 3A has been conferred on the Central Government. Section 3A of the Act also confers powers on the Central Government to issue notifications and also the rul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufacturers like the petitioners but to discharge duty liabilities under the Compounded Levy Scheme. The Annual Production Capacity of the petitioners factory was fixed on the basis of the parameters of factory at 3260 MTs for the period from 1st April, 1998 to 21st July, 1998, and at 2373 MTs for the period form 1st August, 1998 to 31st March, 1999 vide letter dated 27th October, 1998. 7.4 Since the above referred APC was much higher than the annual production of the petitioners factory, the petitioners were paying duty only on the basis of the actual production and not in accordance with the above APC which was much higher and much in disproportion, to the actual production capacity as well as actual production of the factory. The petitioners, in fact, also closed down the factory with effect from 5th May, 1998, and an intimation in that regard was also submitted by the petitioners on 27th July, 1998. It appears that the Gujarat Electricity Board had also disconnected power supply of the petitioners unit with effect from 24th June, 1998 because the petitioners failed to pay electricity charges to the GEB. The petitioners also formally informed the Superintendent of Central ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irected that the assessment shall be made for the whole time of one year, namely, the financial year on the basis of actual production according to the compounded levy provision in all matters not yet closed and still pending before the concerned authorities. 7.7 The petition filed by the petitioners before this Court also came up for hearing with a group of similar petitions on 11th December, 2002 and came to be disposed of by a common order on the ground that Section 3A of the Act was deleted and hence, the petitions had become infructuous. The Court, however, granted liberty to all the petitioners, including the petitioners herein, to agitate the contentions if any cause of action pursuant to the proceedings already initiated under Section 3A before its deletion accrued. 7.8 By the impugned order, the Deputy Commissioner confirmed all the five show cause notices and also imposed penalty of equal amount of the compounded levy amounts as demanded by the said show cause notices on the ground that the petitioners had not paid duties in accordance with the APC fixed by the Government, giving rise to the present petition. 8. Special Civil Application No. 6779 of 2003 : 8.1 The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the amount was duly credited by the petitioners bankers in the Government account on 18th May, 1999 because of the intervening holidays. In order to substantiate their case, the petitioners also submitted copy of letter dated 17th December, 1999 received by the petitioners from Bank of Baroda, the contents of which were self-explanatory. The respondent No. 2 however, passed an Order-in-Original No. SRT-VI/ADJ-78/2001-OA dated 30th October, 2001, thereby confirming payment of interest under Rule 96ZQ(5)(i) of the Rules and imposing penalty of Rs. 6,00,000/- under Rule 96ZQ(5)(ii) of the Central Excise Rules, 1944. Being aggrieved, the petitioner has filed the present petition challenging the aforesaid order passed by the adjudicating authority. 9. During the pendency of Special Civil Applications No. 3637 of 2004 and 6779 of 2003, the petitioners therein had filed applications seeking to amend the memorandum of petitions by inserting paragraph 5A, whereby the petitioners have challenged the impugned orders on the ground that Rules 96ZO, 96ZP and 96ZQ were omitted by Notification No. 6/2001-C.E. (N.T.), dated 1st March, 2001. Vide clause (7) of this notification, these Rules w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and which provided for the manner in which duty was to be determined as well as paid as well as the amount of penalty and interest in case of default in payment of duty, etc. Similarly the Central Government had promulgated Rule 96ZP under Section 3A of the Act thereby providing for the procedure to be followed by the manufacturers of steel re-rolling products like the goods manufactured by the petitioners. Rule 96ZP and various other rules including the Hot Re-Rolling Steel Mills Annual Capacity Determination Rules, 1997 are framed by the Central Government in exercise of powers conferred upon it vide Section 3A read with Section 37 of the said Act. 10.1 It was submitted that Rules 96ZO, 96ZP and 96ZQ were omitted vide clause 7 of Notification No. 6/2001-C.E. (N.T.), dated 1st March, 2001 without any saving clause. Section 3A of the Act was also omitted vide Section 121 of the Finance Act, 2001 which was given assent by the Hon ble President on 11th May, 2001, and thus Section 3A of the Act also stands omitted with effect from 11th May, 2001 without any saving clause. 10.2 It was submitted that in view of the omission of the aforesaid provisions, all the proceedings which we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clear that no action could have been taken in pursuance of the said notice which was issued under Rule 10 as it then existed. The court further held that an action under Rule 10 consists of two parts; one is the initiation of proceedings and the second is the conclusion of the proceedings. But before the proceedings came to be concluded, the power to conclude those proceedings disappeared from the scene. The court, therefore, rejected the argument that once action is initiated, it can be said to be taken under Rule 10. Reliance was also placed upon the decision of this court in the case of Mahendra Mills Ltd. v. Union of India, 1988 (36) E.L.T. 563 (Guj.) for a similar proposition of law. 10.3 It was contended that Section 6 of the General Clauses Act is applicable only when any enactment is repealed. In case of Rayala Corporation (P) Ltd. and Another v. Director of Enforcement (supra), the Supreme Court has held that Section 6 of the General Clauses Act applies to repeals and not to omissions. In case of Kolhapur Canesugar Works Ltd. v. Union of India, 2000 (2) SCC 536 = 2000 (119) E.L.T. 257 (S.C.) also, the Supreme Court has held that Section 6 of the General Clauses Act was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is lawful to do so, because liability to pay penalty does not arise merely upon proof of default in compliance with a particular provision. Penalty would not ordinarily be imposed unless the party obliged, either acted deliberately or in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Reliance was placed upon a decision of the Supreme Court in the case of Hindustan Steel Ltd. v. State of Orissa, (1970) 25 STC 211 = 1978 (2) E.L.T. (J159) (S.C.) for the proposition that even if a minimum penalty is prescribed, the authority competent to impose penalty would be justified in refusing to impose penalty when there was a technical or venial breach of the provisions of the Act. It was submitted that Rule 96ZQ(5)(ii) of the Rules does not leave any such discretion to the adjudicating authority, and in fact this provision takes away the discretion of the adjudicating authority and 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. According to the learned advocate the rule which thus, takes away d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period, no penalty would be imposed if the payment of the first instalment was made by the end of the month, which would mean the delay of at least two weeks for the payment of the first instalment. However, in case of default of even a single day in making payment of the second instalment, penalty of equal amount would be imposed under Rule 96ZQ(5)(ii) of the Rules. It is thus clear that the impugned provision works unreasonably and arbitrarily even within itself and is therefore liable to be struck down as unconstitutional and illegal. Further the gross arbitrariness of this provision becomes amply clear by virtue of the fact that not only the circumstances leading to delayed payment, but even the period of delay also becomes irrelevant for imposing penalty under this provision. If there was a delay of one day in making payment of the second instalment of compounded levy amount or there was a delay of a substantial period in making payment of the second instalment, the amount of penalty would be the same, that is, an amount equal to the duty outstanding. Thus, this rule does not even require consideration about the period of delay or the gravity of default on the part of the con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that all persons similarly circumstanced should be treated alike both in privileges conferred and liabilities imposed. Equal laws would have to be applied to all in the same situation, and there should be no discrimination between one person and another, if as regards the subject matter of the legislation their position is substantially the same. 10.10 The learned advocate further submitted that other manufacturers who were not governed under Section 3A of the Act and were thus, not subjected to Compounded Levy Scheme have been discharging their duty liabilities under Section 3 of the Act, read with the procedure prescribed under Rule 49 of the Rules. Such manufacturers are also given similar facility of payment of duty for the clearances made during the first fortnight of the month by the 20th day of that month and for the clearances made during the second fortnight of the month, by the 5th day of the succeeding month, except in cases of the clearances made during the second fortnight of March of each financial year. Under Rule 49 of the Rules, which provides similar facility to other manufacturers it is also provided that a manufacturer failing to pay the amount of duty by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate matters in the case of Philips Electronics India Ltd. v. State of Karnataka, (MANU/KA/0005/2009). The decision of the Supreme Court in the case of State of Maharashtra v. Kamal S. Durgule, (1985) 1 SCC 234, was also relied upon wherein the court held that classification requires division into classes which are marked by common characteristics. Such division has to be founded upon a rational basis and it must be directed at sub-serving the purposes of the statute. Reliance was also placed upon the decision of the Supreme Court in the case of New Manek Chowk Spinning Weaving Mills v. Ahmedabad Municipality, (1967) 2 SCR 679, and more particularly paragraphs 12 and 13 thereof. 10.13 The decision of the Supreme Court in the case of K.T. Moopil Nair v. State of Kerala, (1961) 3 SCR 77, was cited for the proposition that Article 265 imposes a limitation on the taxing power of the State insofar as it provides that the State shall not levy or collect a tax, except by authority of law, i.e. to say, a tax cannot be levied or collected by a mere executive fiat. It has to be done by authority of law, which must mean valid law. In order that the law may be valid, the tax proposed to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... General Finance Co. and Another v. Assistant Commissioner of Income Tax, Punjab, (2002) 7 SCC 1 = AIR 2002 SC 3126, wherein the court held that in the light of its earlier decisions in Rayala Corporation Pvt. Ltd. (supra) and Kolhapur Canesugar Works Ltd. (supra), the principle underlying Section 6 of the General Clauses Act as saving the right to initiate proceedings for liabilities incurred during the currency of the Act will not apply to omission of a provision in an Act but only to repeal, omission being different from repeal as held in the said decisions. 11. On the other hand, Mr. Darshan Parikh, learned Senior Standing Counsel appearing on behalf of the respondents in Special Civil Application No. 3637 of 2004 opposed the petition submitting that while omitting Rules 96ZQ, 96ZP and 96ZO from the Central Excise Rules, 1944, the legislature has introduced Section 38A in the Act with retrospective effect from 28th February, 1944. It was submitted that Section 38A saves all actions under the above referred rules. Initially, the petitioners were liable to pay duty under Section 3 of the Act. Subsequently, in view of the insertion of Section 3A in the Act, the petitioners becam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r has submitted that during the pendency of the show-cause notice, the Supreme Court had decided the controversy about Section 3A and the compounded levy thereon in the case of Union of India v. Supreme Steels and General Mills Ltd. It was submitted that it was the case of the petitioner that in view of the directions of the Supreme Court, the concerned authority seized of the adjudication of the show-cause notices issued to the petitioners was also duty bound to assess the duties on actual production, and not on the basis of production capacity determined for the factory. Hence, the above referred averments made in the petition indicate that the petitioner is also very clear as regards the decision in the case of Supreme Steels and General Mills Ltd. and the applicability of the same to the facts of the present case. 11.2 Attention was invited to Section 132 of the Finance Act, 2001 which makes provision for Validation of certain action taken to submit that in view of the said provision, everything done under the old provision is saved. Referring to Notification 6/2001 dated 1st March, 2001 whereby Rule 96ZO, Rule 96ZP and Rule 96ZQ came to be omitted, it was submitted that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal is the correct view and that all obligations and liabilities incurred under Rule 96ZQ, Rule 96ZO and Rule 96ZP are saved by the provisions of Section 38A of the Act. 11.3 In support of his submissions, the learned counsel placed reliance upon the decision of the Supreme Court in the case of Commissioner of Central Excise and Customs v. Venus Castings (P) Ltd., 2000 (117) E.L.T. 273 (S.C.). Reliance was also placed upon the decision of the Punjab Haryana High Court in the case of Shree Bhagwati Steel Rolling Mills v. Commissioner of Central Excise, Chandigarh, 2007 (207) E.L.T. 58 (P H), wherein while deciding a similar controversy, the court held that even by omission of Section 3A, the liability of the assessee thereunder was not wiped out. It was submitted that the said decision of the Punjab Haryana High Court would be directly applicable to the facts of the present case. In conclusion, it was submitted that the interpretation as put forth by the petitioners would result in a situation whereby though there is a liability to pay duty, the petitioners would go scot-free without payment of any duty which could never be the intention of the Legislature. 11.4 Mr. Parikh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was submitted that the petitioners have challenged the impugned orders only to the extent the same levy penalty; hence, it is now not open to the petitioners to contend that the entire order is bad on the ground of lapsing of the aforesaid provisions. Inviting attention to the earlier order passed by this court disposing of the petition, it was pointed out that the court had interfered only with the penalty part of the order by observing that the remaining portions are not interfered with, for the simple reason that the petitioners have preferred appeals for challenging the other portions of the orders levying duty and interest. 12.1 The learned counsel invited attention to the decision of the Supreme Court in the case of Union of India v. Krishna Processors (supra) to submit that the Supreme Court has remitted the matter for deciding the question of vires of clause (ii) of sub-rule (5) of Rule 96ZQ of the Act. It was submitted that the scope of the petition cannot be enlarged beyond what was remitted to the High Court. In the circumstances, the petitioners cannot be permitted to raise the contention regarding lapsing of provisions at this stage. Inviting attention to the reli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeping in mind this aspect. According to the learned counsel, Rule 96ZQ applies uniformly to those to whom Section 3A applies, viz., independent textile processors who are a class by themselves. Hence, there is no discrimination on the basis of such classification. 12.4 Mr. Ravani further submitted that the penalty cannot be said to be invalid on the ground of different periods for payment of duty. The defaulter is a class by himself. In the circumstances not providing separate penalties for different defaulters would not make the penalty bad. It was submitted that the contention put forth by the petitioners creates an absurdity because lesser penalty for lesser period would encourage defaulters. Deterrence would have vanished though the prescribed period is known to the assessee. It was submitted that in the decisions relied upon by the petitioners in the context of tax liability, the court found that in the absence of valid classification, the provision is ultra vires. It was submitted that Section 3A of the Act is based upon a valid classification and imposition of penalty cannot be compared to liability to tax as imposition of penalty is different. The object is that the defa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Assistant Collector of Central Excise v. Ramakrishnan Kulwant Rai, 1989 (41) E.L.T. 3 (S.C.). 12.6 Insofar as Section 37 of the Act is concerned, each sub-section is required to be applied independently. It was submitted that the sub-section (1) prevails over the subsequent sub-sections. Under sub-section (1) of Section 37 the Central Government is empowered to make rules to carry into effect the purposes of this Act and as such can frame any rule for this purpose. According to the learned counsel the clauses contained in sub-section (2) of Section 37 are enumerative and not exhaustive. It was submitted that sub-section (3) of Section 37 is an enabling provision and does not debar the Central Government from levying higher penalty. 12.7 It was further submitted that the scheme under Section 3A of the Act is itself unique. Reliance was placed upon the decision of the Supreme Court in the case of Hans Steel Rolling Mill v. Commissioner of Central Excise, Chandigarh, (2011) 3 SCC 748 = 2011 (265) E.L.T. 321, wherein it has been held that the compounded levy scheme for collection of duty for annual capacity of production under Section 3A of the Act and Hot Re-rolling Steel Mil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of the parties, the court does not adjudicate upon the rights of the parties nor does it lay down any principle. Quotability as law applies to the principle of a case, its ratio decidendi. The only thing in a judge s decision binding as an authority upon a subsequent judge is the principle upon which the case was decided. Statements which are not part of the ratio decidendi are distinguished as obiter dicta and are not authoritative. It was submitted that the decision of the Supreme Court was delivered without argument, without reference to the relevant provisions of the Act and the Rules and as such, the same cannot be treated to be a binding precedent insofar as the transaction involved in the present case is concerned. Reliance was also placed upon the decision of the Supreme Court in the case of Zee Telefilms Ltd. v. Union of India, (2005) 4 SCC 649, for the proposition that when questions raised were neither canvassed nor was there any necessity therefor in the earlier decision, the same cannot be treated as a binding precedent within the meaning of Article 141 of the Constitution, having been rendered in a completely different situation. The decision of the Supreme Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deception or wilful action on the part of the assessee. Except for rate of duty which is on actual production under Section 3 of the Act and rate of duty being on annual production capacity under Section 3A of the Act, nothing is different in the procedure to be followed for payment of duty and its charging liability etc. under the Act. Assessees under Section 3 and Section 3A are not a different class except for the limited purpose namely, the manner in which the liability is determined viz. on actual production and on annual production capacity. It was submitted that penalty partakes character of tax or is in the nature of a tax. Reliance was placed upon the decision of the Supreme Court in the case of Collector of Central Excise, Ahmedabad v. Orient Fabrics Ltd., 2003 (158) E.L.T. 545 and more particularly paragraph 17 thereof for the proposition that levy of penalty which is an additional tax has to be under the authority of law which should be clear, specific and explicit. It was submitted that accordingly the principle of reasonable classification of assessees is applicable even in cases of penalty, and that in any case on mere ipse dixit, penalty cannot be imposed to the ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n incorrectly. In the circumstances, no reliance can be placed upon the said decision. Discussion : 15. In the background of the facts and contentions noted hereinabove, the court is called upon to decide as to : (i) Whether in view of the omission of Rule 96ZQ of the Rules with effect from 1st March, 2001, the adjudicating authority could thereafter have initiated action for breach thereof by issuance of show cause notice and/or could have continued with the proceedings initiated but not concluded prior thereto? (ii) Whether any obligation or liability incurred under Section 3A of the Act is saved by Section 6 of the General Clauses Act and whether after the omission of Section 3A of the Act with effect from 11th May, 2001 proceedings initiated under the Rules 96ZQ, 96ZP and 96ZO of the Rules would survive? (iii) Whether Section 38A of the Act saves all obligations and liabilities incurred under Rule 96ZQ of the Rules? If yes, whether the said position would prevail even after the omission of Section 3A of the Act? (iv) Whether in view of Section 132 of the Finance Act, 2001 everything done under the old provision is saved? (v) Whether Rule 96ZQ(5)(ii) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ules. 16.1 On behalf of the revenue, twin contentions have been raised. Firstly, that there is a saving clause while deleting Rule 96ZQ inasmuch as the Notification dated 1st March, 2001 has amended the Central Excise Rules except as respects things done or omitted to be done before such amendment. The other contention is that, even if there is no saving clause in the notification, Section 38A was brought on the statute book with effect from 28th February, 1944 and, therefore, the action could be initiated, continued and concluded even after the omission of Rule 96ZQ as the regular provisions of the Act would continue to apply. In this regard, it may be relevant to notice some facts. Rule 96ZO, 96ZP and 96ZQ came to be omitted by Notification 6/2001-C.E. (N.T.), dated 1st March, 2001. Subsequently, Section 3A of the Act came to be omitted with effect from 11th May, 2001 by Finance Act, 2001. Section 38A, came to be inserted in the Central Excise Act with effect from 28th February, 1944 and reads thus: 38A. Effect of amendments, etc. of rules, notifications or orders. - Where any rule, notification or order made or issued under this Act or any notification or order issued under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nguage used in the notification only affords protection to things already done under the rule, so that it cannot permit further application of that rule by instituting a new prosecution in respect of something already done. It was held that consequently after 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 that rule was in force. In the facts of the said case, simultaneously with the omission of Rule 132-A of the Defence of India Rules, Section 4(1) of the Act was amended so as to bring the prohibition contained in Rule 132-A(2) under Section 4(1) of the Act. The Supreme Court 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 for 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 the said offences. On this interpretation, the court held that the complaint made for the offence under Rule 132-A(4) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entral Excise Rules, 1944. A perusal of the notification dated 1st March, 2001 issued by the Central Government omitting Rules 96ZQ, 96ZO and 96ZP shows that the same does not make any provision similar to that contained in Section 6 of the General Clauses Act, nor does the same make any provision that liability under Rule 96ZQ would continue under the regular provisions after its omission. In M/s. Rayala Corporation (supra), the notification afforded protection to things already done under the rule; so also in the present case, the notification affords protection to things already done under the rules. When Section 38A came to be inserted, the Legislature did not make any provision permitting operation of Rule 96ZQ so as to permit initiation of proceedings under the said Rules. In M/s. Rayala Corporation (supra), it was held by the Supreme Court that Section 6 of the General Clauses Act cannot obviously apply on omission of Rule 132-A of the Defence of India Rules for two obvious reasons: (i) Section 6 applies only to repeals and not to omissions and (ii) Section 6 applies when the repeal is of a Central Act or Regulation and not of a rule. In the facts of the present case, Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly depends on the savings applicable. In a case where a particular provision in a statute is omitted, and in its place, another provision dealing with the same contingency is introduced without a saving clause in favour of pending proceedings, then it can be reasonably inferred that the intention of the Legislature is that the pending proceedings shall not continue but fresh proceedings for the same purpose may be initiated under the new provision. Adverting to the facts of the present case, in view of the language contained in the notification dated 1st March, 2001, the same can only afford protection to action already taken while Rule 96ZQ was in force, but cannot justify initiation of a new proceeding which will not be a thing done or omitted to be done under the rule but a new act of initiating a proceeding after the rule had ceased to exist. In the circumstances, in the present case, upon omission of Rule 96ZQ of the Rules, in view of the language contained in the Notification dated 1st March, 2001, action already taken while the rule was in force would be protected. However, no new proceeding could be initiated after the rule had ceased to exist. 17. However, the aforesaid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mission being different from repeal. The aforesaid view has been reiterated by another Constitution Bench of the Supreme Court in the case of Kolhapur Canesugar Works Ltd. v. Union of India (supra) wherein the court agreed that the earlier view taken in M/s. Rayala Corporation (supra) that Section 6 of the General Clauses Act only applies to repeals and not to omission and applies when the repeal is of a Central Act or regulation and not of the rule. Insofar as Section 3A of the Act is concerned, the second part would not be applicable since the present case relates to omission of a section. However, the first part namely that Section 6 of the General Clauses Act only applies to repeals and not to omissions would be squarely applicable to the facts of the present case. Reliance placed by the Revenue on the decision of the Supreme Court in the case of General Finance Company (supra) is misconceived inasmuch as in the said case the Supreme Court after finding force in the submissions advanced by the learned counsel, observed that it was constrained to follow the two decisions of the Constitution Benches of the Supreme Court in the case of M/s. Rayala Corporation Pvt. Ltd. and Kolhapu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even after the omission of Section 3A of the Act. 18.1 On a plain reading of Section 38A of the Act, it is manifest that the same operates only in respect of amendment, repeal, supersession or rescinding of any rule, notification or order. In the present case, Rule 96ZQ has not been amended, repealed, superseded or rescinded, but has been omitted. As held by the Supreme Court in the case of M/s. Rayala Corporation (supra), omission and repeal are different things and omission does not amount to repeal. Similarly, considering the dictionary meaning of rescind and amend, the same are not synonymous with the word omit . Under the circumstances, Section 38A of the Act would not save any obligation, liability etc. acquired, accrued or incurred under any rule, order or notification which has been omitted. As a necessary corollary, it follows that Rules 96ZQ, 96ZP and 96ZO of the Rules having been omitted vide the notification dated 1st March, 2001, any liability or obligation acquired, accrued or incurred thereunder would not be saved under Section 38A of the Act. 18.2 If one were to assume that any liability, obligation etc. acquired, accrued or incurred under Rules 96ZQ, 96ZP and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 96ZP and 96ZQ were omitted without any saving clause and Section 3A was also omitted vide Section 121 of the Finance Act, 2001 on 11th May, 2001 without any saving clause, all proceedings which were pending as on 11th May, 2001 as regards Rules 96ZO, 96ZP and 96ZQ would thereafter automatically lapse, merits acceptance. Consequently, no orders could have been passed against the petitioners under the said provisions if the actions against the petitioners were not concluded at the time of omission of Section 3A of the Act. 19 As regards the fourth question, viz., whether in view of Section 132 of the Finance Act, 2001 everything done under the old provision is saved, on behalf of the Revenue, reliance has been placed upon Section 132 of the Finance Act, 2001 to contend that the same validates all actions taken or anything done or omitted to be done or purported to have been taken or done or omitted to be done under any rule, notification or order made or issued under the Central Excise Act and that all such actions shall be deemed to be and to always have been, for all purposes, as validly and effectively taken or done or omitted to be done as if the amendment made by Section 131 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der the circumstances, any action taken under Rules 96ZQ, 96ZO and 96ZP of the Rules after Section 3A of the Act came to be omitted from the statute book without any saving clause, would be without authority of law and as such any orders passed in respect thereof after the omission of Section 3A of the Act would be non est. As a result of the aforesaid discussion, the orders impugned in the present petitions are required to be quashed and set aside as being without authority of law. 20. Dealing with the question as regards the vires of Rule 96ZQ(5)(ii) of the Rules which arises only in Special Civil Application No. 1984 of 2002, it may be necessary to refer to the provisions of Rule 96ZQ of the Rules. 20.1 Rule 96ZQ of the Rules insofar as the same is relevant for the present purpose reads thus:- 96ZQ. Procedure to be followed by an independent processor of textile fabrics. - (1) An independent processor of textile fabrics falling under Heading Nos. 52.07, 52.08, 52.09, 54.06, 54.07, 55.11, 55.12, 55.13 or 55.14, or processed textile fabrics of cotton or man-made fibres, falling under Heading Nos. or sub-heading Nos. 58.01, 58.02, 5806.10, 5806.40, 6001.12, 6001.22, 6001.92, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r fails to pay the amount of duty or any part thereof by the date specified in sub-rule (1), he shall be liable firstly to pay the outstanding amount of duty alongwith interest at the rate of twenty four per cent per annum calculated for the outstanding period on the outstanding amount. Clause (ii) of sub-rule (5) which is impugned in the present case makes provision for imposition of penalty equal to an amount of duty outstanding from such independent processor at the end of such month or Rs. 5 ,000/-, whichever is greater. As noted earlier, the petitioners had paid the first instalment after a delay of four days on 19th July, 2000 and the second instalment after a delay of three days on 3rd October, 2000. However, insofar as the delay of four days in payment of the first instalment is concerned, the petitioners were liable to pay only the interest at the rate of twenty four per cent on the outstanding amount for the period during which the amount was outstanding, whereas in respect of the second instalment, apart from payment of interest at the rate of twenty four per cent on the amount outstanding for the period it was outstanding, the petitioners were also liable to pay penalty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may provide that any person committing a breach of any rule shall, where no other penalty is provided by the Act, be liable to a penalty not exceeding five thousand rupees. Thus, by virtue of sub-section (3) of Section 37, in case no other penalty is provided by the Act, the Central Government is empowered to make provision for imposition of penalty not exceeding five thousand rupees for committing a breach of any rule. Rule 96ZQ has been framed in exercise of powers under Section 37 of the Act. Hence, by virtue of sub-section (3) of Section 37, the Central Government is expressly empowered to provide for a penalty not exceeding five thousand rupees in case of breach of the said rule. However, clause (ii) of sub-rule (5) of Rule 96ZQ of the Rules provides for imposing penalty equal to the amount of duty or rupees five thousand whichever is greater on the amount of duty outstanding from an independent processor at the end of the month. The question that therefore arises for consideration is whether the Central Government has the power to make provision for imposition of penalty greater than five thousand rupees. 20.6 On behalf of the petitioners, it has been contended that penalt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levied must be within the legislative competence of the legislature imposing a tax and authorising the collection thereof and, secondly, the tax must be subject to the conditions laid down in Article 13 of the Constitution. One of such conditions envisaged by Article 13(2) is that the legislature shall not make any law which takes away or abridges the equality clause in Article 14, which enjoins the State not to deny to any person equality before the law or the equal protection of the laws of the country. It cannot be disputed that if the Act infringes the provisions of Article 14 of the Constitution, it must be struck down as unconstitutional. For the purpose of these cases, we shall assume that the State Legislature had the necessary competence to enact the law, though the petitioners have seriously challenged such a competence. The guarantee of equal protection of the laws must extend even to taxing statutes. It has not been contended otherwise. It does not mean that every person should be taxed equally. But it does mean that if property of the same character has to be taxed, the taxation must be by the same standard, so that the burden of taxation may fall equally on all person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uation, and there should be no discrimination between one person and another if as regards the subject-matter of the legislation their position is substantially the same. (7) The classification must not be arbitrary and must be rational, that is to say, it must not only be based on some qualities or characteristics which are found to be in all the persons grouped together and not in others who are left out but those qualities or characteristics must have a reasonable relation to the object of the legislation. In order to pass the test, two conditions must be fulfilled, namely, (1) that the classification must be founded on an intelligible differentiation which distinguishes those that are grouped together from others and (2) that the differentia must have a rational relation to the object sought to be achieved by the Act. (8) The differentia which is the basis of the classification and the object of the Act are different things and what is necessary is that there must be a nexus between them. In short, while Article 14 forbids class discrimination by conferring penalties or imposing liabilities upon persons arbitrarily selected out of a large number of other persons similarly s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount on 29th September, 2000, for the reasons mentioned in its reply, the bank had put the date 3rd October, 2000 in the TR-6 challan. However, in view of the mandatory nature of clause (ii) of sub-rule (5) of Rule 96ZQ, the respondents even in such circumstances, were left with no option but to impose penalty equal to the amount of duty. Thus, it is apparent that clause (ii) of sub-rule (5) of Rule 96ZQ operates very harshly on an assessee despite there being no fault on his part in making deposit of the amount within the prescribed time limit. 20.12 At this juncture, it may be pertinent to refer to Section 11AC of the Act which provides for levy of penalty for short-levy or non-levy of duty in case where such short-levy or non-levy is by reason of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of the provisions of the Act or rules made thereunder with an intent to evade payment of duty. The said section provides that in such case, the person shall be liable to pay penalty equal to the amount of duty as determined under sub-section (2) of Section 11A of the Act. However, despite the fact that Section 11AC operates where there is fraud, co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ently subjected to harsh treatment of unreasonable penalty under Rule 96ZQ(5)(ii) compared to manufacturers of other excisable goods. Moreover, considering the nature of the penalty prescribed even for one day s delay, it is apparent that the said provision would amount to imposition of an unreasonable restriction on the petitioners right to conduct business thereby rendering the said provision as violative of Article 19(1)(g) of the Constitution. 20.14 In the light of the above discussion, this court is of the view that clause (ii) of sub-rule (5) of Rule 96ZQ of the Rules is ultra vires Articles 14 and 19(1)(g) of the Constitution of India as well as Section 37 of the Central Excise Act and is beyond the authority of the rule making power of the Central Government and as such, is required to be struck down. 20.15 The above view taken by this court finds support in the decision of the Punjab Haryana High Court in the case of Bansal Alloys and Metals Pvt. Ltd. v. Union of India (supra) wherein the court has held that the provision for minimum mandatory penalty equal to the amount of duty even for slightest bona fide delay without any element of discretion is beyond the purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons would be without authority of law. A perusal of the second part of the judgment indicates that it was contended on behalf of the manufacturers that the part of sub-rule (3) which provides that in case excise duty is paid according to the said sub-rule, in that event, the manufacturer shall not avail the benefit available under sub-section (4) of Section 3A of the Central Excise Act, 1944 is bad. In relation to the said contention, the Supreme Court placed reliance upon its earlier decision in the case of Commissioner of Central Excise Customs v. M/s. Venus Casting (P) Ltd. (supra) wherein it has been held that two procedures namely one as provided under sub-section (4) of Section 3A of the Central Excise Act and the other as provided under sub-rule (3) of Rule 96ZO of the Central Excise Rules are alternative procedures and the assessee has to opt for one. Once having done so, he cannot claim the benefit of the other. 21.1 Another contention raised on behalf of the Revenue was that the petitioners having not raised the contention with regard to lack of jurisdiction before the appellate authority, they cannot be permitted to challenge the show-cause notice at a belated stage. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 507, the Supreme Court held that a decree passed by a court without jurisdiction on the subject matter or on the grounds on which the decree is made goes to the root of its jurisdiction or lacks inherent jurisdiction is a coram non judice. A decree passed by such a court is a nullity and is non est. Its invalidity can be set up whenever it is sought to be enforced or acted upon as a foundation for a right, even at the stage of execution or in collateral proceedings. The defect of jurisdiction strikes at the very authority of the court to pass decree and cannot be cured by consent or waiver of the party. In the case of Rattan Lal Sharma v. Managing Committee, Dr. Hari Ram (Co-Education) Higher Secondary School and Others, 1993 (4) SCC 10, the Supreme Court held that generally, a point not raised before the Tribunal or administrative authorities may not be allowed to be raised for the first time in the writ proceeding, more so when the interference in the writ jurisdiction which is equitable and discretionary is not a must as indicated by the Supreme Court in A.M. Allison v. State of Assam, AIR 1957 SC 227, particularly when the plea sought to be raised for the first time in a writ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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