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2015 (9) TMI 464 - ALLAHABAD HIGH COURT

2015 (9) TMI 464 - ALLAHABAD HIGH COURT - 2016 (332) E.L.T. 591 (All.) - Levy of penalty - quantum of penalty - intention to evade payment of duty - Rule 96ZP (3) of the Central Excise Rules, 1944 - Held that:- From perusal of the show cause notices we find that there is no allegation of intention to evade payment of duty by the respondent. The only allegation is of late payment of central excise duty. In the order in original the adjudicating authority recorded a finding of fact that the intere .....

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der Rule 96ZP(3) of the Rules was not imposable on the respondent-assessee. However, since the respondent-assessee has not challenged the impugned order of the Tribunal and, therefore, penalty as levied by the Tribunal cannot be interfered. - Decided against the assessee. - Central Excise Appeal No. - 178 of 2015 - Dated:- 4-9-2015 - Hon'ble Tarun Agarwala And Hon'ble Surya Prakash Kesarwani, JJ. For the Appellant : K.C. Sinha, R. C. Shukla For the Respondent : B. J. Agrawal, P. Agrawal .....

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Learned counsel for the appellant submits that the substantial question of law raised in this appeal is covered by the decision of Hon'ble Supreme Court in the case of Commissioner of Customs and Excise and Vs. Kannapiran Steel Re-Rolling Mills 2011 (263) E.L.T. 22 (S.C.) and Commissioner of Central Excise, Mumbai 2011 (267) E.L.T. 438 (S.C.) In the light of the above judgments he submits that the penalty under Rule 96ZP (3) of the erstwhile Central Excise Rules, 1994 (hereinafter referred t .....

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submits as under: (i) Rule 96ZP (3) was omitted by notification No. 6 of 2001 and CE (N.P.) dated 11.5.2001 without any saving clause and, therefore, the appellants could not have passed the order in original dated 13.11.2003. He submits that the provisions itself was not available as on the date on which the order was passed by the adjudicating authority. (ii) Rule 96ZP was enacted by the Central Government in exercise of powers conferred under Section 37 (3)/(4) of the Act and, therefore, even .....

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us judgments. 5. We have considered the submissions of learned counsel for the parties and perused the record. 6. Briefly stated the facts of the present case are that the respondents are engaged in the manufacture of M.S. Bar falling under Chapter sub heading No. 7214.90 of the schedule to the Central Excise Teriff Act, 1985. They opted for compounded levy scheme under Rule 96ZP (3) of the Rules for full and final discharge of their duty liability based on annual capacity of production. As per .....

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to the amount of duty be not imposed under Rule 96ZP (3) of the Rules for delayed payment of duty. Another show cause notice dated 18th April, 2000 was issued due to delay of few days in depositing the amount of duty for the months of January, February and March, 2000. The said show cause notices were adjudicated and an order in original dated 13.11.2003 was passed by the Assistant Commissioner of Division I Meerut imposing penalty of ₹ 13,30,000/- under Rule 96ZP (3). Being aggrieved the .....

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er (Appeals) vide order dated 22nd June, 2004. Aggrieved with the said appellate order the present appellant as well as the respondent assessee preferred appeals before the Customs, Excise and Service Tax Appellate Tribunal, New Delhi who dismissed the appeal of the respondent-assessee and partly allowed the appeal of the present appellants by enhancing the penalty to ₹ 3 lacs. Aggrieved with the aforesaid order of the Tribunal, the present appeal has been filed by the appellant. 7. The pr .....

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provided by this Act, be liable to a penalty not exceeding five thousand rupees. (4) Notwithstanding anything contained in sub-section (3), and without prejudice to the provisions of section 9, in making rules under this section, the Central Government may provide that if any manufacturer, producer or licensee of a warehouse- (a) removes any excisable goods in contravention of the provisions of any such rules, or (b) does not account for all such goods manufactured, produced or stored by him, or .....

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ined elsewhere in these rules, a manufacturer may, in the beginning of each month from 1st day of September, 1997 to the 31st day of March, 1998 or any other financial year, as the case may be, and latest by the tenth of each month, pay a sum equivalent to one-twelfth of the amount calculated at the rate of ₹ 300/- multiplied by the annual capacity in metric tonnes, as determined under sub-rule (3) of rule 3 of the Hot Re-rolling Mills Annual Capacity Determination Rules, 1997, and the amo .....

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nufactured or produced by a re-rolling mill in which the nominal centre distance of the pinions in the pinion stand is up to 160 millimetres, the sum payable under this sub-rule shall be calculated as if fo the letters and figures "Rs. 300/-", the letters and figures "Rs.150/- were substituted: Provided further that for the month of September, 1997, the manufacturer may pay the amount due for the said month by the 30th of September, 1997: Provided also that if a manufacturer makes .....

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such month till the date of actual payment of the outstanding amount; and (ii) a penalty equal to the amount of duty outstanding from him at the end of such month or five thousand rupees, whichever is greater: Provided further that if the manufacturer fails to pay the total amount of the duty payable for each of the months from September, 1997 to March, 1998 by the 30th day of April, 1998, he shall also be liable to pay a penalty equal to the outstanding amount of duty as on the 30th day of Apri .....

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nfers power on the Central Government to make rules. Sub Section (1), Sub Section (2) and Sub Section (2A) of Section 37 are not relevant for the purposes of this case. The relevant provisions are Sub Section (3) and Sub Section (4) of Section 37 of the Act which have been reproduced above. Perusal of Sub Section (3) shows that the Central Government may frame rules to provide that any person committing breach of any rule shall, where no other penalty is provided by this Act, be liable to a pena .....

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viable on such goods or ₹ 10000/- which ever is greater. Thus penalty not exceeding ₹ 5000/- could be provided under Sub Section (3) while the rules framed under Sub Section 4 could provide for penalty for contravention of the provisions of any rule with intent to evade payment of duty, for a sum not exceeding duty leviable on such goods or ₹ 10000 which ever is greater. Thus by rules framed under Sub Section 4, minimum penalty of ₹ 10000 and a maximum penalty not exceedi .....

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should be an intention to evade payment of duty. Thus, penalty under Rule 96ZP(3) may be levied on assessee only if he intended to evade payment of duty. In other words, in the absence of intention to evade payment of duty, penalty is not leviable under Rule 96ZP(3). 10. From perusal of the show cause notices we find that there is no allegation of intention to evade payment of duty by the respondent. The only allegation is of late payment of central excise duty. In the order in original the adj .....

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ALD 159 wherein it was held that an order imposing penalty for failure to carry out a statutory obligation was the result of a quasi criminal proceedings and that penalty would not ordinarily be imposed unless a party either acted deliberately in defiance of law or was guilty of contumacious conduct or acted dishonestly in conscious disregard of its obligation. The Supreme Court further held that penalty would also not be imposed merely because it was lawfully to do so. 12. The assessee offered .....

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and has rendered itself liable to penalty but there was no intention to evade payment of central excise duty....... From the above discussions and findings it goes to prove that although party has paid duty much before issue of show cause notice even then party cannot escape from penalty provision." 13. Accordingly, the adjudicating authority imposed a penalty of ₹ 13,30,000/- in respect of three show cause notices. 14. In the appeal, the Commissioner (Appeals) Customs and Central Exc .....

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#8377; 3 lacs observing that the penalty confirmed by the Commissioner (Appeals) is too low. 15. In the memorandum of appeal there is no allegation that the findings of the authorities that the amount of duty could not be deposited by the respondent-assessee due to financial constraints and that there was no intention to evade payment of central excise duty; is incorrect or perverse. The adjudicating authority has itself recorded a finding of fact that there was no intention to evade the payment .....

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as 15, 16 & 17), the High Court held the penalty provision of Rule 96ZO, ZP and ZQ to be ultra vires the Act and the Constitution. 17. In the case of Commissioner of Commissioner of Customs and Central Excise, Hyderabad v. Sunder Ispat 2015 (316) ELT 238 (AP), the Andhra Pradesh High Court held that penalty under Rule 96 ZO (3) is not leviable in view of the fact that penalty provision of Rule 96ZO, ZP and ZQ of the rules were declared ultra-vires by Punjab and Haryana High Court in the case .....

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High Court held the penalty provisions of Rule 96ZP (3) of the Rules, prescribing the penalty exceeding ₹ 5,000/- to be without authority of law and beyond the rule making power conferred under Section 37(3) of the Act. 19. Similar view was expressed by the Gujrat High Court in the case of Sunland Metal Recycling Industries v. Union of India 2014 (310) ELT 736. 20. We are in agreement with the view taken by the High Courts as noted above. 21. Under the circumstances, penalty under Rule 96Z .....

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s are saved by the provisions of Section 38 of the Act. A Full Bench of this Court in the case of Simbhauli Sugar Mill Ltd. Vs. Union of India 2006 (205) E.L.T. 141 (All.) held as follows: "19. The section validates any action taken under any such rule at any time between 28.2.1944 and 11.5.2001, when it received the assent of the President and Section 38A was for all purposes to be deemed to be on the Statute book, notwithstanding anything contained in any judgment or order of any court. I .....

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hich is sought to be achieved by the insertion, has some significance to help us to decipher the intention sought to be achieved by the insertion. Rule 10 which laid down the procedure for refund of duty erroneously refunded was omitted without any saving clause. Some High Courts, including our, held that proceedings stood lapsed, while the Mandya Pradesh High Court held that the proceedings would not lapse and could continue under Section 11A. The authoritative pronouncement in Kolhapur Sugarca .....

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nd Act 25 of 1978 introducing Section 11A are sought to be remedied. The intention of the legislature is crystal clear that proceedings initiated under Rule 10 would not lapse but could be taken to its logical conclusion for which Section 38A has been introduced. 24. Section 38A uses the words 'amendment', 'repealed', 'superseded' and 'rescinded' with regard to such rule. 'Amendment' has come up for consideration before various courts, its implication was .....

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an existing law is small, the Act profeses to amend; if it is extensive, it repeals a law and re-enacts it... "Black's Law Dictionary (6th Ed.) defines amendment to mean to change or modify for the better, by removing defects, or to correct or revise. The Random House Dictionary defines it as-to alter, modify, rephrase for the better. A three Judge Bench in State of Orissa v. Titaghur Paper Mills Co. Ltd. (AIR 1985 S.C. 1293). while examining the implication of the word 'supersede&# .....

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