2012 (3) TMI 370 - AT - Central Excise

Reduction in penalty imposed - whether penalty to be imposed upon the appellant in terms of provisions of Rule 96ZQ(5) should be equivalent to the duty late deposited by them or the imposition of penalty of Rs. 5, 000/- would meet the ends of justice - Held that - Rule 96ZQ as also Rule 96ZQ(5)(ii) were the subject matter of writs pending before various High Courts challenging the vires of the same. Reference can be made to the Hon ble Supreme Court decision in the case of Union of India v. Krishna Processors 2009 (5) TMI 11 - SUPREME COURT wherein the matters were remanded to various High Courts for deciding the question of vires of the provisions of Rule 96ZQ(5)(ii). It is brought to our notice that Hon ble High Court of Punjab and Haryana vide their judgment in the case of Bansal Alloys and Metals v. Union of India 2010 (11) TMI 83 - PUNJAB & HARYANA HIGH COURT has held that the provisions of Rules 96ZO 96ZP and 96ZQ provide minimum penalty without discretion and without considering extent and circumstances for delay are ultra vires the Constitution of India - Decided against Revenue.

Summary

Issues:
Reduction of penalty imposed by Commissioner (Appeals) from Rs. 99,46,000 to Rs. 5000.
Dispute regarding penalty imposition under Rule 96ZQ(5) - equivalent to late deposited duty or fixed penalty of Rs. 5,000.
Validity of Rule 96ZQ(5) and related provisions challenged in various High Courts.
Applicability of Supreme Court decision in Commissioner of Central Excise, Mumbai v. Sunil Silk Mills to the present case.

Analysis:
The appeal was filed by the respondents against the reduction of penalty from Rs. 99,46,000 to Rs. 5000 by the Commissioner (Appeals). The dispute revolved around the penalty imposition under Rule 96ZQ(5), whether it should be equivalent to the late deposited duty or a fixed penalty of Rs. 5,000. The Revenue contended for a penalty equivalent to 100% of the late deposited duty, citing the maximum penalty provision of the Rule.

The Tribunal noted that Rule 96ZQ and its sub-sections were under challenge in various High Courts regarding their constitutionality. Specifically referencing the judgment in Bansal Alloys and Metals v. Union of India, the High Court of Punjab and Haryana held that the provisions of Rules 96ZO, 96ZP, and 96ZQ, which provide for minimum penalty without discretion, are ultra vires the Constitution of India.

Given the absence of contrary decisions and the High Court's ruling on the vires of Rule 96ZQ(5), the Tribunal found no merit in the Revenue's appeal to enhance the penalty equivalent to the duty amount. The Tribunal also addressed the Revenue's argument citing the Supreme Court decision in Commissioner of Central Excise, Mumbai v. Sunil Silk Mills. However, the Tribunal clarified that the vires of the provisions were not the subject of dispute before the Supreme Court in that case, and the question was neither raised nor considered. Therefore, the Tribunal rejected the Revenue's plea for penalty enhancement based on the Supreme Court decision, emphasizing the High Court's ruling on the provisions' constitutionality.

In conclusion, the Tribunal found no justification for the Revenue's appeal and accordingly rejected it, upholding the penalty reduction to Rs. 5000 as decided by the Commissioner (Appeals). The judgment was pronounced in open court on 30-3-2012.