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TMI Blog2018 (9) TMI 1579X X X X Extracts X X X X X X X X Extracts X X X X ..... n of a mandatory penalty equal to the amount of duty not being by statute would itself make rules 96ZO, 96 ZP and 96 ZQ without authority of law. We, therefore, uphold the contention of the assessees in all these cases and strike down rules 96ZO, 96 ZP and 96 ZQ insofar as they impose a mandatory penalty equivalent to the amount of duty on the ground that these provisions are violative of Article 14, 19(1)(g) and are ultra vires the Central Excise Act. Appeal dismissed - decided against Revenue. - CENTRAL EXCISE APPEAL NO.69 OF 2015 - - - Dated:- 10-7-2018 - PRASANNA B. VARALE AND S. M. GAVHANE, JJ. Mr. D. S. Ladda, Advocate for appellant ORAL ORDER: Heard Mr. Laddha, learned Counsel appearing for the appellant. 2. Perusal of the order sheet shows that on 19th December, 2017, notice was issued by this Court to the respondent. Further record shows that the report is received by the office stating that the notice of respondent was tried to be served by the process server and the watchman, who was attending the company premises, after having discussion with the owner of the company, informed that the company is closed since 12 to 15 months. The report also shows t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court and against the decision of Punjab and Haryana High Court, a Special Leave Petition was preferred before the Hon'ble the Supreme Court. 6. The Hon'ble the Apex Court was pleased to consider the issue insofar as the validity of Rule 96ZO as well as the other two issues which fell for consideration before the High Court, namely, (I) whether omission of the compounded levy scheme in 2001 wipes out the liability of the Assessee for the period during which the scheme was in operation, and (II) whether the letter of demand of interest for delayed payment was liable to be set aside on the ground of delay. 7. The Hon'ble the Apex Court, considering the bunch of civil appeals as well as the Special Leave Petitions filed by the respective parties, including the appeals filed by the Revenue, dealt with these issues in detail. It will not be out of place to refer to the issues considered by the Apex Court and the same read thus: 2. This batch of appeals raises questions relating to the demand for interest and penalty Under Rules 96ZO, 96 ZP and 96 ZQ of the Central Excise Rules, 1994, which were framed in order to effectuate the provisions contained in Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the normal scheme for collection of Central excise duty on goods manufactured in the country. Under the same, Rule 96-ZP of the Central Excise Rules stipulate the method of payment and Rule 96-ZP contains detailed provision regarding time and manner of payment and it also contains provisions relating to payment of interest and penalty in event of delay in payment or non-payment of dues. Thus, this is a comprehensive scheme in itself and general provisions in the Act and the Rules are excluded. (at page 751) 32. We now come to the other appeals which concern themselves with penalties that are leviable under Rules 96 ZO, 96 ZP and 96 ZQ. Since the lead judgment is a detailed judgment by a Division Bench of the Gujarat High Court reported in Krishna Processors v. Union of India, and followed by other High Courts, we will refer only to this decision. 33. On the facts before the Gujarat High Court, there were three civil applications each of which challenged the constitutional validity of the aforesaid rules insofar as they prescribed the imposition of a penalty equal to the amount of duty outstanding without any discretion to reduce the same depending upon the time taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e object sought to be achieved, the necessity to restrict the citizen's freedom, the inherent pernicious nature of the act prohibited or its capacity or tendency to be harmful to the general public, the possibility of achieving the object by imposing a less drastic restraint, and in the absence of exceptional situations such as the prevalence of a state of emergency-national or local-or the necessity to maintain essential supplies, or the necessity to stop activities inherently dangerous, the existence of a machinery to satisfy the administrative authority that no case for imposing the restriction is made out or that a less drastic restriction may ensure the object intended to be achieved. (at page 161) 36. The direct and immediate impact upon the fundamental right of the citizen is that he is exposed to a huge liability by way of penalty for reasons which may in given circumstances be beyond his control and/or for delay which may be minimal. The possibility of achieving the object of deterrence in such cases can be achieved by imposing a less drastic restraint. In point of fact when we contrast these provisions with Section 37 of the Act, it becomes clear how arbitrary a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 25,00,000/- or ₹ 50,00,000/-. This being the position, it is clear that when contrasted with the provisions of the Central Excise Act itself, the penalty provisions contained in Rules 96 ZO, 96 ZP and 96 ZQ are both arbitrary and excessive. 39. A penalty can only be levied by authority of statutory law, and Section 37 of the Act, as has been extracted above does not expressly authorize the Government to levy penalty higher than ₹ 5,000/-. This further shows that imposition of a mandatory penalty equal to the amount of duty not being by statute would itself make rules 96 ZO, 96 ZP and 96 ZQ without authority of law. We, therefore, uphold the contention of the assessees in all these cases and strike down rules 96ZO, 96 ZP and 96 ZQ insofar as they impose a mandatory penalty equivalent to the amount of duty on the ground that these provisions are violative of Article 14, 19(1)(g) and are ultra vires the Central Excise Act. 9. The Hon'ble the Apex Court then arrived at a conclusion and same reads thus:- 44. Conclusion : We have declared in this judgment that the interest and penalty provisions under the Rules 96 ZO, ZP, and ZQ of the Central Exc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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