2006 (6) TMI 292 - AT - Central Excise

Summary

Issues:
1. Imposition of penalty under Rule 96ZQ (5)(ii) of the Central Excise Rules, 1944 for delayed duty payment.
2. Validity of penalty imposition based on Commissioner's orders and subsequent corrigenda.
3. Impact of High Court rulings on the Compounded Levy Scheme and penalty imposition.
4. Discretionary power of quasi-judicial authority in imposing penalties under Rule 96ZQ.

Analysis:

1. Imposition of Penalty: The appellants were engaged in manufacturing fabrics and were required to pay duty under the Compounded Levy Scheme. The issue arose when they paid duty for May, June, and July 1999 after the 15th day of the respective months, resulting in a total outstanding duty of Rs. 14,79,032. The department sought to impose a penalty equal to the outstanding duty under Rule 96ZQ (5)(ii) of the Central Excise Rules, 1944. The appeal was made against the penalty imposition.

2. Validity of Penalty based on Commissioner's Orders: The appellants argued that they paid duty for May and July 1999 as per the Commissioner's orders which required penalty payment 'at the end of the month'. For June 1999, a part of the duty was paid with a minor delay. The corrigenda to the Commissioner's orders, correcting the mistake, were received after the dispute period. The appellants contended that they did not willfully default in duty payment, and the penalty imposition was unjustified. They also claimed that the Compounded Levy Scheme was invalidated by the High Court, making penalty imposition inappropriate.

3. Impact of High Court Rulings: The Tribunal considered a similar case where the High Court struck down the ACD Rules, leading to the demand being set aside. In the present case, the High Court's ruling on the Compounded Levy Scheme's invalidity had a significant impact on penalty imposition. As the ACD Rules were declared unconstitutional, any duty liability based on Annual Capacity of Production determined under these rules was deemed illegal. Therefore, imposing a penalty for delayed duty payment under such a scheme was deemed null and void. The appellants were entitled to benefit from this legal position.

4. Discretionary Power of Quasi-Judicial Authority: The Tribunal concluded that the penalty imposed on the appellants was unjust and vacated it. The lower authorities failed to exercise discretion in imposing a penalty less than the maximum prescribed under Rule 96ZQ(5)(ii). It was emphasized that the quasi-judicial authority had the discretion to impose a lesser penalty based on the circumstances of the case, which was not exercised in this instance. The appeal was allowed, and the penalty was revoked.

In conclusion, the judgment highlighted the importance of legal validity in penalty imposition, considering High Court rulings and the discretionary power of quasi-judicial authorities in such matters.