Jharkhand High Court
Commissioner Of Central Excise vs M/S.Union Enterprises. on 8 January, 2014
Author: R.Banumathi
Bench: Chief Justice, Aparesh Kumar Singh
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IN THE HIGH COURT OF JHARKHAND AT RANCHI
Taxation Case No.3 Of 2004
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The Commissioner of Central Excise, Jamshedpur Petitioner
Versus
M/s. Union Enterprises, Jamshepur Respondent
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For the Petitioner: M/s.Ratnesh Kumar, Amit Kumar
For the Respondent: Mr. Ashok Kumar Sinha
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PRESENT
HON'BLE THE CHIEF JUSTICE
HON'BLE MR.JUSTICE APARESH KUMAR SINGH
CAV on 2nd January, 2014 Pronounced on 8th , January, 2014
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R.Banumathi,C.J. This application is preferred against the
order of the Customs, Excise & Gold (Control) Appellate
Tribunal(CEGAT) dated 28.10.2002 passed in Appeal No.ER -
307/2001, by which CEGAT reduced the penalty amount
imposed under rule 96ZO(3) from Rs.83,87,000/- to
Rs.40,00,000/-.
2. The respondent-assessee is the manufacturer of M.S
Ingot/Billets falling under chapter, sub-heading 7206.90 of
Schedule to CETA, 1985. The said goods were notified for the
purpose of levy of duty of excise under the provisions of section
3A of Central Excise Act, 1944, based on Annual Capacity of
Production (ACP) in the manner as prescribed under the
provision of Rule 96ZO of Central Excise Rules (CER). Sub-rule 1
of Rule 3 of the Induction Furnace Annual Capacity
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Determination Rules, 1997 specifies the manner in which the
aforesaid ACP is to be determined.
3. Based on the declaration submitted by the assessee,
the Commissioner, Central Excise, Jamshedpur, vide his order
dated 23.3.1998, fixed the ACP as 9600 MT in respect of one
furnace of the assessee. Since the assessee opted, vide its letter
dated 11.9.1997, for payment of duty on the said goods under
the provision of sub-rule 3 of Rule 96ZO of CER'44, the assessee
was required to pay duty @ Rs.5,00,000/- (Rs.five lakhs) only per
month. In March, 1999, the assessee installed another furnace.
The Commissioner, Central Excise, Jamshedpur, vide his order
dated 5.8.1999, determined ACP in respect of another furnace as
9600 MT. Since the assessee had opted for discharge of duty
liability under the provisions of Rule 96ZO(3), the assessee was
required to pay Rs.10,00,000/- (Rs.ten lakhs) in two instalments
for full and final discharge of its duty liability for month.
4. The assessee during the period November, 1999 to
March, 2000 had paid an amount of Rs.30,00,000/- (Rs.thirty
lakhs) only, whereas it was required to pay Rs.50,00,000/-
(Rs.fifty lakhs) for full and final discharge of its duty liability.
Hence, show cause notice contemplating recovery of
Rs.20,00,000/- (Rs.twenty lakhs) as duty short paid during the
aforesaid period and proposing imposition of penalty as well as
levy of interest was served on the assessee. In total, the following
four show cause notices were issued to the assessee:-
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Sl. SCN NO. Amount Period
No.
1. V(72)(15)49/98/8441 dated 14.10.1998 Rs.20,00,000/- June '98 to Oct.'98
2. V(72)(15) 79/99/5350 dated 31.08.1999 Rs.25,00,000/- Mar.'99 to July,'99
3. V(72)(15) 18/2000/1906 dated 3.3.2000 Rs.20,00,000/- Aug.'99 to Oct.'99
4. V(72)(15)52/2000/4152 dated 5.6.2000 Rs.20,00,000/- Nov.'99 to Mar.'2000
5. After offering opportunity to the assessee, the
Commissioner, Central Excise, Jamshedpur, vide Order-in-
Original No.93-96 & 97/Commissioner/2000 dated 24.11.2000,
confirmed an amount of Rs.83,87,097/- as duty short paid by
the assessee during the period June, 1998 to September, 1998
and for the period March, 1999 to March, 2000 under the
provision of Rule 96ZO(3) of CER'44 read with Section 11A(2) of
the CEA'44. By the said order, the Commissioner imposed
penalty of an identical amount of Rs.83,87,097/- under Rule
96ZO(3) of the CER'44 and directed to verify the payment
particulars to determine the amount of interest @ 18% per
annum.
6. Being aggrieved by the Order-in-Original No.93-96 &
97/Commissioner/2000 dated 24.11.2000, the assessee
preferred appeals before the CEGAT in Appeals ER-306-
308/2001. The CEGAT, by the order dated 19.12.2001, directed
the assessee to deposit an amount of Rs.25,00,000/- (Rs.twenty-
five lakhs). Since the respondent-assessee has not deposited the
amount, the CEGAT, by the order dated 22.2.2002, dismissed all
three appeals.
7. Again Appeal Nos.ER-306-307/2001 were taken up by
the CEGAT. By the order dated 28.10.2002, in each of the
appeals (ER-306-307/2001), the CEGAT reduced the penalty
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amount from Rs.83,87,000/- to Rs.40,00,000/-, holding as
under:-
"5. After hearing both the sides we find
that it is now well settled that the mandatory
penalty to the extent of 100% under a particular
provision is the maximum penalty provided
under the law, for which adequate reasons
should be given by the authorities. In the instant
case we take note of the appellant's plea that
the duty was not being deposited by them on
account of financial difficulties. They have also
deposited a substantial amount in question and
are ready to deposit the balance with interest.
Taking all these circumstances into
consideration we reduce the penalty amount
from Rs.83.87 lakhs to Rs.40,00,000/-(rupees
forty lakh). But for the above modification in the
quantu of penalty, the appeal is otherwise
rejected."
Being aggrieved by the order of reduction of penalty passed in
Appeal Nos.ER-307/2001, the Revenue has preferred this appeal.
8. Tax Case No.7/2003 has been filed under section 35H
of the Central Excise Act seeking reference of the matter to this
Court and also for setting aside the order dated 28.10.2002
passed by the CEGAT in Appeal No.ER-307/2001 reducing the
amount of penalty imposed by the Commissioner of Central
Excise. Being aggrieved by the order dated 28.10.2002 of the
CEGAT, the assessee also preferred W.P (T) No.5528/2003. As
against the order dated 28.10.2002 passed in Appeal Nos.ER-
306-307/2001, the Revenue preferred Tax Case No.5/2003. By a common order dated 2.11.2007, W.P (T) No.5528/2003 filed by the assessee and Tax Case No.5/2003 filed by the Revenue were dismissed. This Court, in the said order dated 2.11.2007, observed that consequently there is no reason to answer the question raised in Tax Case No.7/2003 and disposed of the same.
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9. This appeal is filed by the Revenue against the same common order dated 28.10.2002 of the CEGAT passed in Appeal No.ER-307/2001. The learned counsel for the Revenue, Mr.Ratnesh Kumar, submitted that even though Tax Case No.5/2003 preferred by the Revenue against the order dated 28.10.2002 passed in Appeal No.ER-306/2001 was dismissed by the order dated 2.11.2007, the present appeal need to be considered afresh in the light of subsequent decisions of Hon'ble Supreme Court rendered in the case of Union of India & Ors. Vs. Dharamendra Textile Processors & Ors. reported in (2008) 13 SCC 369. Learned counsel further submitted that in the light of the law laid down in the case of Dharamendra Textile Processors & Ors., the Commissioner/Tribunal has no power to reduce the penalty under the provision of Rule 96ZO(3) of the Central Excise Rules, 1944. It was, therefore, submitted that notwithstanding the dismissal of Tax Case No.5/2003, this appeal need to be considered on its merit in the light of the law presently holding field. Learned counsel also submitted that earlier dismissal of Tax Case No.5/2003 (against Appeal No.ER-306/2001) would not preclude this Court from considering the question afresh.
10. We have also heard learned counsel appearing for the respondent-assessee. Learned counsel for the assessee submitted that after the impugned judgment passed by this Court in W.P(T) No.5528/2003 (2.11.2007), the assessee moved Hon'ble Supreme Court in Civil Appeal No.8410 of 2009 and the Hon'ble Supreme Court disposed of the same, holding that the matters are 6 covered by the judgment rendered in the case of Dharamendra Textile Processors & Ors. reported in (2008) 13 SCC 369 and giving liberty to the assessee(s) to challenge the validity of Rule 96ZO before the High Court. Learned counsel further submitted that earlier the matter has attained finality and the issue involved in the present Tax Case is a covered matter and therefore, the instant Tax Case is liable to be dismissed.
11. We have carefully considered the submissions and also the common order passed by the Division Bench of this Court in Tax Case Nos.5 and 7 of 2003 and W.P(T) No.5528/2003.
12. In the case of Dharamendra Textile Processors & Ors., Hon'ble Supreme Court analyzed the penalty provision under section 11AC and also Rule 96-ZQ and 96ZO of Central Excise Rules,1944 as to whether the penalty provision is mandatory or discretionary, rejecting the plea that Rules 96ZQ and 96ZO have a concept of discretion inbuilt. In the case of Dharamendra Textile Processors & Ors., reference was made for determination as to whether Section 11AC of the Central Excise Act, 1944 inserted by the Finance Act, 1996 with the intention of imposing mandatory penalty on persons who evaded payment of tax should be read to contain mens rea as an essential ingredient and whether there is scope of levying penalty below the prescribed minimum. While considering the scope of Section 11AC, Hon'ble Supreme Court also considered the question whether there is a concept of discretion in levying penalty under 7 Rules 96ZQ and 96ZO. The background under which reference was made has been referred in para 3 to 5, which are as follows:-
"3. The Division Bench made reference to Rule 96-ZQ and Rule 96-ZO of the Central Excise Rules, 1944 (in short "the Rules") and a decision of this Court in SEBI v. Shriram Mutual Fund and was of the view that the basic scheme for imposition of penalty under Section 271(1)(c) of the IT Act, Section 11-AC of the Act and Rule 96- ZQ(5) of the Rules is common. According to the Division Bench the correct position in law was laid down in SEBI case and not in Dilip Shroff case. Therefore, the matter was referred to a larger Bench.
4. It was noted that in some cases the assessee had challenged the vires of Rule 96- ZQ(5) and the Gujarat High Court held that the said Rule incorporated the requirement of mens rea. The Division Bench clarified that if the larger Bench takes a view to say that the penalty leviable under the said clause is mandatory, it is still open to the assessee to challenge the vires of Rule 96-ZQ(5).
5. During the course of hearing, learned counsel for the parties agreed that a similar issue is involved in respect of Rule 96-ZO."
13. Observing that the levy of penalty is a mandatory penalty and there is no scope for any discretion and rejecting the plea that Rules 96ZQ and 96ZO have a concept of discretion in- built, the Hon'ble Supreme Court in para 20 in the case of Dharamendra Textile Processors & Ors. held as under:-
"20. Above being the position, the plea that Rules 96-ZQ and 96-ZO have a concept of discretion inbuilt cannot be sustained. Dilip Shroff case was not correctly decided but SEBI case has analysed the legal position in the correct prospective. The reference is answered. ..."
14. The decision rendered in the case of Dharamendra Textile Processors & Ors. was further clarified in the decision 8 rendered in the case of Union of India Vs. Rajasthan Spinning & Weaving Mills reported in (2009) 13 SCC 448. Considering the discretion of the authority in levying penalty under section 11AC, and observing that section 11AC does not apply to every case of non-payment or short-payment of duty regardless of conditions expressly mentioned in section 11AC for its application, Hon'ble Supreme Court held as under:-
"30. At this stage, we need to examine the recent decision of this Court in Dharamendra Textile. In almost every case relating to penalty, the decision is referred to on behalf of the Revenue as if it laid down that in every case of non-payment or short-payment of duty the penalty clause would automatically get attracted and the Authority had no discretion in the matter. One of us (Aftab Alam, J.) was a party to the decision in Dharamendra Textile and we see no reason to understand or read that decision in that manner."
34. The decision in Dharamendra Textile must, therefore, be understood to mean that though the application of Section 11-AC would depend upon the existence or otherwise of the conditions expressly stated in the section, once the section is applicable in a case the Authority concerned would have no discretion in quantifying the amount and penalty must be imposed equal to the duty determined under sub-section (2) of Section 11-A. That is what Dharamendra Textile decides. It must, however, be made clear that what is stated above in regard to the decision in Dharamendra Textile is only insofar as Section 11-AC is concerned. We make no observations (as a matter of fact there is no occasion for it!) with regard to the several other statutory provisions that came up for consideration in that decision."
15. Even though the earlier Tax Case No.5/2003 preferred by the Revenue against the order dated 28.10.2002 passed in Appeal No.ER-306/2001 was dismissed, we are of the view that in the light of the decision rendered in the case of Dharamendra Textile Processors & Ors. reported in (2008) 13 SCC 369, the 9 matter has to be reconsidered. Accordingly, the order dated 28.10.2002 passed in Appeal No.ER-307/2001 by the CEGAT is set aside and the appeal is allowed. The matter is remitted to CEGAT for reconsidering the matter afresh in the light of the law laid down by the Hon'ble Supreme Court in the case of Dharamendra Textile Processors & Ors. reported in (2008)13 SCC 369 and further clarified in the case of Union of India Vs. Rajasthan Spinning & Weaving Mills reported in (2009) 13 SCC
448. As the matter is a quite old one, the Tribunal shall take up the matter as early as possible.
(R.Banumathi, C.J) (Aparesh Kumar Singh,J) Dey/NAFR