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2016 (10) TMI 956 - ALLAHABAD HIGH COURT

2016 (10) TMI 956 - ALLAHABAD HIGH COURT - TMI - Delayed payment of central excise duty under Section 3A of the Central Excise Act, 1944 - Demand of Interest and penalty - Rules 96ZO, 96 ZP and 96 ZQ of the Central Excise Rules, 1994 - violative of Articles 14 and 19(1)(g) of the Constitution - Whether, mandatory quantum of penalty equal to the amount of duty prescribed under Rule 96ZO (3) (ii) of erstwhile Central Excise Rules, 1944, can be reduced? - Section 35-G of Central Excise Act, 1944 - .....

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Government to levy penalty higher than ₹ 5,000/-. 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. - The sole question of law in this appeal is answered against the department and in favor of the assessee - appeal dismissed. - Central Excise Appeal No. 19 of 2013 - Dated:- 24-10-2016 - Hon'ble Bharati Sapru And Hon'ble Vinod Kumar Misr .....

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, mandatory quantum of penalty equal to the amount of duty prescribed under Rule 96ZO (3) (ii) of erstwhile Central Excise Rules, 1944, can be reduced?" This very question of law has been answered in favour of the assessee and against the department by the Apex Court in the case of Shree Bhagwati Steel Rolling Mills vs. Commissioner of Central Excise reported in 2015 (326) E.L.T. 209, wherein the Apex Court has held that when contrasted with the provisions of the Central Excise Act itself, .....

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aph Nos.35, 36, 37, 38 and 39 of the aforesaid judgment are being reproduced hereunder:- "35. However, insofar the reasoning of the High Court is concerned on the aspects stated hereinabove, we find that on all three counts it is unexceptionable. First and foremost, a delay of even one day would straightaway, without more, attract a penalty of an equivalent amount of duty, which may be in crores of rupees. It is clear that as has been held by this Court, penalty imposable under the aforesai .....

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see from paying the duty in time, and on certain given factual circumstances, despite there being no fault on the part of the Assessee in making the deposit of duty in time, a mandatory penalty of an equivalent amount of duty would be compulsorily leviable and recoverable from such Assessee. This would be extremely arbitrary and violative of Article 14 for this reason as well. Further, we agree with the High Court in stating that this would also be violative of the Appellant's fundamental ri .....

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mposing a prohibition on the carrying on of a business or profession, attempt an evaluation of its direct and immediate impact upon the fundamental rights of the citizens affected thereby and the larger public interest sought to be ensured in the light of the 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 .....

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ate 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 and excessive they are. 37. Section 37(3) and 37( .....

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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 rule, or (b) does not account for all such goods manufactured, produced or stored by him, or (c) engages in the manufacture, production or storage of such goods without having applied for the registration required Under Section 6, or (d) contravenes the provisions of any such rule with intent to evade payment of duty, then, all such .....

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