Gujarat High Court
Rajlaxmi Dyeing And Printing Mills Pvt. ... vs Union Of India (Uoi) And 3 Ors. on 22 June, 2005
JUDGMENT D.A.Mehta, J.
1. This petition preferred under Article 226 of the Constitution of India challenges the action of respondent No. 2 in imposing penalty of a sum of Rs. 5,00,000/- under Rule 96ZQ (5) (ii) of the Central Excise Rules, 1944 (the Rules) towards the delay of one day in making payment of duty.
2. The facts in brief. The petitioner, a Private Limited Company is a manufacturer of man-made fabrics and as per Hot Air Stenter Independent Textile Processors Annual Capacity Determination Rules, 2000, was required to discharge duty liability on the basis of annual production capacity. Such duty had been fixed by the competent authority at the rate of Rs. 1.5 lacs per chamber per month. Accordingly, for the month of April 1999, an amount of Rs. 13.5 lacs was required to be paid by the petitioner towards duty on or before 15th April 1999. It is an admitted position that a sum of Rs. 8.5 lacs was paid by TR-6 challan on 15th April 1999 and the balance amount of Rs. 5 lacs was paid on the very next day i.e. on 16th April 1999.
3. According to respondent No. 3, as the petitioner had committed default within the meaning of provisions of Rule 96ZQ(3) of the Rules, the petitioner was liable to be visited with penalty under Sub-rule (5) of Rule 96ZQ of the Rules and hence, a show cause notice dated 19th August 1999 came to be issued. The petitioner was called upon to show cause as to why -
1. The outstanding amount of levy of Rs. 5,00,000/- should not be confirmed under Rule 96 ZQ (5) of the Central excise Rules, 1944 read with Section 11A of the Central Excise Act, 1944.
2. The interest @ 36% per annum on outstanding amount of levy for the outstanding period total amounting to Rs. 520/- should not be confirmed under Rule 96ZQ (5) of the Central Excise Rules, 1944.
3. Penalty equal to outstanding amount should not be imposed on them under Rule 96ZQ (5) and Rule 173 (Q)(1) of the Central Excise Rules, 1944.
1. After considering the reply and submissions made by the petitioner, an order in original came to be made on 29th December 2000 whereby penalty of Rs. 5,00,000/- was imposed under Rule 96ZQ(5)(ii) of the Rules. The same was carried in appeal and the Commissioner (Appeals) has confirmed the order of penalty by his order dated 11th June 2002.
4. Mr.S.N.Thakkar appearing on behalf of Mr.M.K.Vakharia, the learned advocate for the petitioner contended that the penalty ought not to have been levied considering the fact that the petitioner was prevented by circumstances beyond its control from depositing the balance amount by the prescribed date. That the petitioner had deposited the duty to the extent of Rs. 8.5 lacs by the prescribed date and less than half the amount payable remained outstanding on the prescribed date; the said liability was discharged immediately on the next day. That for default of 24 hours, the order levying penalty to the extent of Rs. 5 lacs was not only harsh but unreasonable, especially when one considers the fact that, for the very same default, the loss of revenue for a day was compensated by payment of interest to the tune of Rs. 520/-. In other words, the submission was that the penalty was not commensurate with the default and the authority had not exercised the discretion vested in it in a judicial manner. The learned advocate emphasized the fact that the payment was made voluntarily on the immediately succeeding day without being called upon by the respondent authority to plead that this established the bona fide of the petitioner that it had no intention to withhold government dues and it was only due to circumstances that the payment came to be delayed.
1. It was also urged on behalf of the petitioner that, as could be seen from show cause notice, the petitioner was called upon to explain why penalty should not be imposed both under Rule 96ZQ(5) and Rule 173Q(1) of the Rules, but while passing the order, the respondent No. 3 had exercised discretion not to levy penalty under the latter provision and imposed penalty only under Rule 96ZQ(5) of the Rules. Thus, according to him, the exercise of discretion was not sound and proper.
2. Inviting attention to decision of this Court rendered on 11-9-2002 in case of Vitrang Silk Mills Pvt. Ltd. v. Union of India in Special Civil Application No. 7596 of 2002, it was submitted that, while dealing with the very rule, it was held by this Court that the revenue authority was required to read the rule in the manner indicated in the judgment and the matter was restored to the file of the concerned authority. He also invited attention to decision of the Apex Court in the case of Hindustan Steel Ltd. v. State of Orissa, to submit that merely because it is lawful to levy penalty, even in case where minimum penalty is prescribed, the authority competent to impose penalty will be justified in refusing to levy penalty, when there is a technical or venial breach of the provisions. It was, therefore, urged that, in the circumstances, the discretion vested in the authority was not validly exercised and the penalty order was required to be quashed and set aside. In the alternative, it was submitted that, as directed by this Court in the earlier case of Vitrang Silk Mills Pvt. Ltd. (supra), the matter be restored to the file of respondent No. 3 to decide the matter afresh in light of the legal position pronounced by this Court as well as the Apex Court.
5. It is necessary to record that though the revenue is represented by the counsel, no affidavit in reply has come on record. Mr.Malkan has reiterated the contentions raised by revenue before this Court in the earlier decision and hence, it is not necessary to repeat the same.
6. Considering the ratio of decision rendered by this Court in case of Vitrang Silk Mills Pvt. Ltd. (supra), it is apparent that the respondent authority is vested with a discretion whether to levy or not to levy penalty even in case of default. For laying down this law, this Court has referred to and placed reliance on decision of the Apex Court in case of State of M.P. v. Bharat Heavy Electrical s Ltd., [1998] 99 ELT 33. Similarly, in the case of Hindustan Steel Ltd. (supra), the Apex Court has categorically laid down that even if minimum penalty is prescribed by a provision, it will not be proper for the authority to levy penalty even if it is lawful to do so when there is a technical or venial breach. It is further laid down by the Supreme Court that penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation.
7. As can be seen from the impugned order dated 29th December 2000 made by respondent No. 3, none of the aforesaid principles have been taken into consideration while passing the order. In the circumstances, it would be in the interest of justice if the impugned order (Annexure SC¬) is quashed and set aside, restoring the matter to respondent No. 3 for the purposes of fresh adjudication in light of the legal principles enunciated by the Apex Court and this Court, considering the peculiar facts and circumstances of the case.
8. Accordingly, the order in original dated 29th December 2000 imposing penalty of Rs. 5,00,000/- under Rule 96ZQ(5)(ii) of the Rules (Annexure SC¬) is hereby quashed and set aside. Respondent No. 3 is directed to pass a fresh order after taking into consideration the submissions that may be made by the petitioner at the time of hearing in light of the settled legal position. As a consequence, the appellate order dated 11th June 2002 (Annexure SD¬) would not survive. The petition is accordingly disposed of. Rule made absolute. There shall be no order as to costs.