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2016 (10) TMI 569 - CESTAT BANGALORE

2016 (10) TMI 569 - CESTAT BANGALORE - TMI - Differential duty under the compounded levy scheme u/s 3 (a) of the Central Excise Act - iron and steel products manufactured in Hot Steel Rerolling Mills with effect from 01.09.1997 - constitutional validity of Rule 5 - the decision in the case of R.S. Industries (Rolling Mills) Vs Union of India [2016 (5) TMI 1277 - RAJASTHAN HIGH COURT] referred - Held that: - the issue of the case R.S. Industries (Rolling Mills) Vs Union of India is similar and th .....

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COURT] apply where it was held that a penalty can only be levied by authority of statutory law, and Section 37 of the Act, 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 96ZO, 96ZP and 96ZQ without authority of law. The Rules of 96ZO, 96ZP and 96ZQ striked down insofar as they impose a mandatory penalty equivalent to the amo .....

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r. J. Harish, A.R. For the Respondent ORDER Per S. S. Garg The applicant has filed miscellaneous application stating that the appeals have been filed by M/s Bhuwalka Steel Industries Ltd against order- in-appeal dated 09.04.2002 passed by Commissioner (Appeals). The said Unit which was formally controlled and managed by M/s Bhuwalka Steel Industries Ltd has been taken over as a going concern along with the assets and liabilities by Deccan Alloys Pvt Ltd., the applicant herein in the year 2008 pu .....

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rder. The issue in all the appeals relate to payment of differential duty under the compounded levy scheme introduced in terms of Section 3 (a) of the Central Excise Act in respect of iron and steel products manufactured in Hot Steel Rerolling Mills with effect from 01.09.1997. The appeals are directed against the order of the Commissioner (Appeals) dated 11.06.2002 vide which the Commissioner rejected the appeal of the appellant and upheld the order-in-original. 3. Briefly the facts of the pres .....

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n Rules 1997, a formula was prescribed for determining the annual capacity of production of the hot steel re-rolling mills. Subsequently, by Notification No. 45/97 CE (N.T) dated 30.08.1997, Rule 5 had been inserted to the Hot Re-rolling Steel Mills Annual Capacity Determination Rules 1997. As per the said Rule 5, in case, the annual capacity of production determined by applying formula prescribed in Rule 3(3) in respect of the hot re-rolling mill was less than the actual production of the mill .....

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use notices even the penalty was also proposed along with interest. Appellant filed a reply to the show-cause notice, controverted the allegations in the show-cause notice and the Assistant Commissioner vide his order dated 15.01.2001 confirmed the demand for duty to the extent of ₹ 1,84,32,355/- and interest at the appropriate rate. However the imposition of penalty was kept in abeyance till the disposal of the civil appeals by the Hon ble Supreme Court. Aggrieved by the said order, appel .....

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. The amount of differential duty demanded, period of demand and the penalty imposed in the aforesaid appeals are stated as below: Appeal No. Order-in-Appeal No. & date Period of demand Differential duty demanded Penalty imposed E/835/2002 226/2002 dt 09.04.2002 01.09.1998 to 31.03.2000 ₹ 11,23,109/- NIL (Kept in abeyance) E/836/2002 226/2002 dt 09.04.2002 01.04.1998 to 31.08.1998 ₹ 2,95,555/- NIL (Kept in abeyance) E/1019/2002 376/2002 dated 11.06.2002 01.09.1997 to 31.03.2000 & .....

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,797.561 MT 1447.471MT E/1019/2002 C.No. IV/16/1302/Pt.III Tech dated 23.12.1997 37,448.514MT 14,027.55MT E/94/2003 C.No. IV/16/1302/Pt.III Tech dated 23.12.1997 37,448.514MT 14,027.55MT E/94/2003 C.No. IV/16/4/97TECH (Pt.III)/202 dated 08.03.2000 48,127.15MT 19,139.981MT Learned counsel for the appellant submitted that while passing the annual capacity determination order, the Commissioner has fixed the annual production capacity by invoking provisions of Rule 5 of the Hot Re-rolling Mills Capa .....

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provided in Rule 3(3) of the Hot Re-rolling Annual Capacity Determination Rules 1997. Hence the demand for differential duty has arisen in all the appeals. He further submitted that the appellant had challenged the constitutional validity of Rule 5 of Hot Re-rolling Steel Mills Annual Capacity Determination Rules 1997 and the determination orders before the Hon ble High Court of Karnataka in Writ Petition No. 6682/2002. The Constitutional validity of the said Rule 5 was upheld by the learned sin .....

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nding before the Hon ble Supreme Court. The learned counsel further submitted that the issue involved in the said civil appeals pending before the Hon ble Supreme Court has a direct bearing on the differential duty demand involved in the present appeals and if the said civil appeals are allowed by the Hon ble Supreme Court, then the said demand for differential duty will not arise. Therefore he prayed that any order passed by the Tribunal should be subject to the outcome of civil appeals pending .....

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ive of Articles 14 and 19 (1)(g) of the Constitution of India. He submitted that in view of the decision on Bhagwati Steel Rolling Mills the demand for interest and penalty will have to be set aside in this case. On the other hand learned A.R. reiterated the findings of the Commissioner and submitted that the division Bench of the Hon ble High Court of Karnataka has already upheld the constitutional validity of Rule 5 and appeal against the same is pending in the Hon ble Supreme Court but no sta .....

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Rule 5 from another angle, we are further satisfied about the view taken by us. Rule provides that if the production during the year 1996-97 was more than the production determined by the formula in Sub-rule (3) of Rule 3 of the Rules, then that has to be taken as the annual capacity for the financial year 1997-98 and the subsequent years. This rule, it seems, was introduced keeping in view the fact that without there being any change in the plant and machinery, including man power, there shoul .....

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f any, on the part of manufacturer to show or go for lower/less production to gain an advantage of the scheme. We find that the classification have a rational nexus with the object sought to be achieved by the law. The State, in the exercise of its governmental power, has, of necessity, to make laws operating differently in relation to different groups or class of persons to attain certain ends. 27. In the result, we are of the opinion, that Rule 5 is neither violative of Article 14 of the Const .....

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gh Court in the case of R.S. Industries (Rolling Mills) Vs Union of India [2016(338)ELT 666(Raj.) wherein the identical issue was involved and the Hon ble High Court of Rajasthan has observed in para 5 as under: In fact the issue has already been determined by the Karnataka High Court by a detailed judgment and now is pending consideration before the Apex Court, there exists no reason to make such an application. The learned counsel for the petitioner submits that if the appeals are pending befo .....

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