Customs, Excise and Gold Tribunal - Tamil Nadu
Arun Smelters Ltd. vs Commissioner Of Central Excise on 24 June, 2008
ORDER P.G. Chacko, Member (J)
1. The appellants are engaged in the manufacture of ingots and billets of non-alloy steel falling under Heading 72.06 of the CETA Schedule, which were specified for purposes of compounded levy of duty under Section 3A of the Central Excise Act during the material period. Two show-cause notices were issued to them on 24.03.1999, one for recovery of duty for the month of September, 1998 and the other for recovery of duty for the period October, 1998 to February, 1999, both in terms of the annual capacity of production and the consequential monthly duty liability fixed by the jurisdictional Commissioner. Both the notices proposed penalties also on the noticee under Rule 96ZO(3) of the Central Excise Rules, 1944. The proposals were contested. The Commissioner of Central Excise, in one order, confirmed demand of duty to the extent of Rs. 16,06,507/- for the period October, 1998 to February, 1999 after dropping the demand for the earlier period by granting abatement of duty for the period of closure of the furnace. On account of stay of penal proceedings generally in all cases of this nature, ordered by the Hon'ble Supreme Court, the Commissioner could not take up the penalty-related issue. As soon as the stay was vacated, the Commissioner took up this issue also and passed another order imposing penalty equal to duty on the party under Rule 96ZO(3) ibid which is under challenge in Appeal No. E/644/2002. Appeal No. E/632/2001 is against the demand of duty.
2. It appears from the records that the learned Commissioner has demanded the above amount of duty by denying CENVAT credit on inputs. Duty leviable under Rule 96ZO(3) read with Section 3A was paid for the period October, 1998 to February, 1999, after the compounded levy scheme was revoked. In other words, the payment of duty was made when the normal scheme of levy of duty under Section 3 of the Act was restored to manufacturers of non-alloy steel ingots and billets. In this scheme, the benefit of CENVAT credit is very much available to the manufacturers for utilisation in payment of duty on final products. The appellants utilised CENVAT credit (which accrued to them on inputs received in their factory on or after 01.04.2000) for payment of duty on final products manufactured and cleared under the compounded levy scheme. This was rightly disapproved by the Commissioner and hence the demand of duty. As rightly submitted by the learned SDR, ingots and billets of non-alloy steel, on which duty of excise was paid or to be paid under Section 3A of the Central Excise Act, stood specifically excluded from the coverage of Notification No. 5/94-CE (NT) dated 01.03.1994 issued by the Central Government under Rule 57A of the Central Excise Rules, 1944, thereby meaning that the said goods were not specified as inputs for the purpose of input duty credit under Rule 57A. Again, as rightly pointed out by her, ingots and billets of non-alloy steel were also not specified as final products for purpose of Rule 57A, which means that input duty credit was not available to be utilised in payment of duty on non-alloy steel ingots and billets, on which duty of excise was to be paid under Section 3A. This position is clear from Notification No. 21/99-CE(NT) dated 28.02.1999.
3. Obviously, the appellants were not entitled to utilise CENVAT credit taken on inputs, for payment of duty on non-alloy steel ingots and billets under the compounded levy scheme and, therefore, the demand of duty raised in the impugned order is liable to be honoured.
4. At this juncture, it is submitted by the learned Counsel that the CENVAT credit which has been held to have been illegally availed and utilised requires to be restored to the appellants for lawful utilisation in payment of duty under Section 3 of the Central Excise Act. There is no valid contest to this submission. It is therefore directed that the appellants be permitted to avail the above CENVAT credit and utilise the same for payment of duty on final products manufactured on or after 01.04.2000, provided, of course, the party pays up the duty demanded by the Commissioner, from PLA.
5. The exorbitant penalty imposed on the appellants by the Commissioner does not appear to be reasonable. Rule 96ZO(3) had prescribed a maximum (equal to duty) for penalty on a person who defaulted payment of duty under the compounded levy scheme. The preponderance of judicial decisions is to the effect that mere prescription of a maximum amount for penalty in a penal provision shall not stand in the way of a quasi-judicial authority imposing lesser penalty on the defaulter of duty in the particular facts and circumstances of the case. The learned Counsel has relied on one of such decisions, which was rendered by a learned single member of the Tribunal in Tirumala Alloys & Castings (P) Ltd. v. Commissioner of Central Excise, Chennai 2006 (205) E.L.T. 1170 (Tri.-Chennai)], wherein, in the facts and circumstances of the case, a penalty equal to duty imposed by the departmental authority was reduced to Rs. 25,000/- under Rule 96ZO(3). In the facts and circumstances of the present case, we are of the view that a penalty of Rs. 2,00,000/- (Rupees Two Lakhs only) will match the offence founds against the appellants.
6. As regards the demand of interest on duty, we find that Rule 96ZO(3) was couched in mandatory language and, therefore, the assessee could not escape their liability. They are liable to pay interest at the prescribed rate on the amount of duty demanded. The appellants shall pay this interest also along with the duty. Appeal No. E/632/2001 stands dismissed and Appeal No. E/644/2002 stands partly allowed.
(Dictated and pronounced in open court)