Customs, Excise and Gold Tribunal - Mumbai
Bharat Petroleum Corporation Ltd. vs Commissioner Of Central Excise, ... on 12 October, 2001
Equivalent citations: 2002(139)ELT382(TRI-MUMBAI)
JUDGMENT G.N. Srinivasan, Member (J)
1. The above appeal has been filed against the order passed by the Commissioner of Central Excise, Mumbai-II, made in Order-in-Original No. 17/2000 dated 11.5.2000 in and by which he had imposed a penalty of Rs. 2,07,00,000/- under rule 173Q of the Central Excise Rules for a period from 1.4.1994 to 27.9.1996 and of Rs. 1,17,59,557.00 under Section 11AC of the Central Excise Act for the period from 28.9.1996 to 31.10.1998.
2. The appellants are engaged in the manufacture of petroleum products falling under chapter 27 of the Central Excise Act. The department gathered intelligence indicating that the appellants were charging and recovering pumping charges separately by way of issuing debit notes to their customers and their charges were not included in the assessable value of the products. Investigations revealed that the appellants were raising debit notes non Reliance Industries Ltd. recovering pumping charges showing them as delivery charges @ Rs. 80/p per K.L. on supply of super kerosene oil and @ Rs. 50/- per metric tonne for supply of raw naphtha (special cut naphtha). The charges were not included in the assessable value of the aforesaid products and such charges were recovered separately over and above the price of excisable goods declared to the Central Excise department. From the agreement between the parties it is revealed that the buyers have requested for the suppliers of the product to be pumped at their Patalganga plant through their pipeline and the price was included pumping charges and other operating costs incurred by the seller manufacturer. A show cause notice dated 31.3.1999 was issued demanding Rs. 3,25,00,182/- and which was paid on 16.12.1998 should not be appropriated towards the duty demanded and penalty equivalent to the duty is demanded should not be imposed on them. The interest at the prescribed rates was also demanded which worked out to Rs. 57,26,148/-. In Annexure A to the show cause notice, what was mentioned in the earlier portion of the order was described in an elaborate manner. On 29.4.1999 a reply to the show cause notice was filed. In the reply there is a reference to the meeting held on 10.12.1998 convened in the room of the Commissioner of Central Excise, Mumbai-II and the payment of Rs. 3,25,00,182/- vide PLA No. 2349 dated 16.12.1998 was informed to the department. The assessee also paid the interest by TR6 challan dated 28.1.1999. The reply mainly states that the assessee was under a bona fide belief that the pumping charges were in lieu of transportation charges and therefore this was only a mere case of failure and it should not be alleged as wilful mis-statement. In the reply there was also reference to the clearance of the goods though the pipeline to Reliance Industries Ltd. which was known to the department by various documentary evidence available with the department. It was also emphasized therein about audit parties consisting of CERA and Excise department periodically visiting the Refinery for inspection. The appellant relied on the decision of the Tribunal in the case of Richardson and Cruddas (1972) Ltd. v. CCE 1991 (37) ECR 236. The payment before the issuance of the show cause notice would show that there is an absence of malafide intention as is revealed in the case of Indian Diamond Products v. CCE 1995 (78) ELT 87. There were some of the cases which have been cited. The matter was heard and the adjudicating authority issued a corrigendum proposing to impose penalty under Section 11AC from September, 1996 onwards. The adjudicating authority confirmed the demand as indicated in the first paragraph. Hence the present appeal.
3. The counsel for the appellants, Shri A. Hidayatulla, Senior Counsel appearing along with Shri Sheerazi and Shri D.P. Bhave, Advocates, argued before us that the facts would reveal that before the issuance of show cause notice the differential duty had been paid on 15.12.1998. The interest was also paid on 28.1.1999. Therefore the show cause notice which was issued on 31.3.1999 proposing to impose penalty in wrong in law. He further stated that on the date of issuance of the show cause notice there was no amount of duty pending. He further stated that in another case (Adjudication Order No. 37.2001 dated 10.2.2001) the adjudicating authority had dropped the proposal to impose penalty under Section 11AC. This is revealed in paragraph 7 of the Order -in-Original No. 37/2001 dated 19.2.2001. He therefore attacks the impugned order before us that imposition of penalty at the full amount, viz. Rs.2.7. crores under rule 173Q for the period 1.4.1994 to 27.9.1996 and Rs. 1.17 crores under Section 11AC for the subsequent period upto 30.1.1998 is bad in law. He further emphasized the fact that in view of the judgment of the Supreme Court in the case of BHEL v. State of Madhya Pradesh 1998 (99) ELT 33 that the provision for maximum penalty is merely indicative of the upper limit of penalty imposable and that it is not necessary that in all cases such penalty must be imposed by the authority. He also cited various other case laws. Learned DR adopts the reasoning.
4. We have considered the case in all its aspects. While it is true that in this case payment of duty has been made prior to issuance of show cause notice but it is a fact that Rule 173Q of the Central Excise Rules has been interpreted to mean similar to Section 11AC of the Central Excise Act. In respect of penalty the adjudicating authority has distinguished each and every order of the CEGAT and held in paragraph 20 of the order as follows:-
"Clearly, these are orders passed in the facts and circumstances of those particular cases. They cannot be said to lay down any general principle that public sector undertaking are to be exempt from penal consequences of their actions. I do not think that those cases are on all fours with the present one, which is characterised by a comprehensive failure on the part of the assessee to discharge its statutory duty of declaring the full particulars of the charges recovered by them from their customers. I have already observed that the cooperation by the assessee with investigation does not erase the original offence. The same would apply also to the voluntary payment since it came to be made only after the offence was discovered by the department."
5. When we look into the provisions of rule 173Q and Section 11AC, the Supreme Court in the case of Zunjarrao Bhikaji Nagarkar v. UOI 1999 (112) ELT 772 at page 785, paragraphs 30 & 31, held as follows:-
"30. Two principal issues arise for our consideration: (1) if levy of penalty under Rule 173Q was obligatory and (2) was there enough background material for the Central Government to form a prima facie opinion to proceed against the officer on the charge of misconduct on his failure to levy penalty under Rule 173Q. Appellant has contended that it is only now after insertion of Section 11AC in the Act that levy of penalty has become mandatory and that it was not so under Rule 173Q. This contention does not appear to be correct. In both Rule 173Q and Section 11AC the language is somewhat similar. Under Rule 173Q" such goods shall be liable to confiscation" and the person concerned "shall be liable to penalty" not exceeding three times the value of excisable goods or five thousand rupees whichever is greater. Under Section 11AC the person, who is liable to pay duty on the excisable goods as determined" shall also be liable to pay penalty equal to the duty so determined". What is the significance of the word "liable" used both in Rule 173Q and Section 11AC? Under Rule 173Q apart from confiscation of the goods the person concerned is liable to penalty. Under Section 11AC the word" also" has been used but that does not appear to be quite material in interpreting the word"liable" and if liability to pay penalty has to be fixed by the adjudicating authority. The word "liable in the Concise Oxford Dictionary means, "legally bound, subject to a tax or penalty under an obligation". In Black's Law Dictionary (sixth edition), the word "liable" means, "bound or obliged in law or equity; responsible;; chargeable; answerable; compellable to make satisfaction, compensation, or restitution.... Obligated; accountable for or chargeable with. Condition of being bound to respond because a wrong has occurred. Condition out of which a legal liability might arise....Justly or legally responsible or answerable."
31. When we examine Rule 173Q it does appear to us that apart from the offending goods which are liable to confiscation the person concerned with that shall be liable to penalty upto the amount specified in the Rule. It is difficult to accept the argument of the appellant that levy of penalty is discretionary. It is only the amount of penalty which is discretionary. Both things are necessary: (1) goods are liable to confiscation and (2) person concerned is liable to penalty. We may contrast the provisions of Rule 173Q and Section 11AC with Section 271 of the Income-tax Act, 1961. This Section, prior to amendment in 1988, stood as under:
"Failure to furnish returns, comply with notices,concealment of income, etc.
271. (1) If the Income Tax Officer or the Appellate Assistant Commissioner or the Commissioner (Appeals) in the course of any proceedings under this Act is satisfied that any person-
(a) has failed to furnish the return of total income which he was required to furnish under Sub-section (1) of Section 139 or by notice under Sub-section (2) of Section 139 or Section 148 or has filed to furnish it within the time allowed and in the manner required to Sub-section (1) of Section 139 or by such notice as the case may be, or
(b) has without reasonable cause failed to comply with a notice under Sub-section(1) of Section 142 or Sub-section (2) of Section 143 or fails to comply with a direction issued under Sub-section (2A) of Section 142, or
(c) has concealed the particulars of his income or deliberately furnished inaccurate particulars of such income, he may direct that such person shall pay by way of penalty,-
(i) in the cases referred to in clause(a),-
(a) in the case of a person referred to in Sub-section (4A) of Section 139, where the total income in respect of which he is assessable as a representative assessee does not exceed the maximum amount which is not chargeable to income-tax, a sum not exceeding one per cent of the total income computed der this Act without giving effect to the provisions of Sections 11 and 12 for each year or part thereof during which the default continued.
(b) in any other case, in addition to the amount of the tax, if any, payable by him, a sum equal to two per cent of the assessed tax for every month during which the default continued.
Explanation.- In this clause "assessed tax" means tax as reduced by the sum, if any, deducted at source under Chapter XVII-B or paid in advance under Chapter XVII-C;
(ii) in the cases referred to in Clause (b) in addition to any tax payable by him, a sum which shall not be less than ten per cent but which shall not exceed fifty per cent of the amount of the tax, if any, which would have been avoided if the income returned by such person had been accepted as the correct income;
(iii) in the cases referred to in clause (c), in addition to any tax payable by him, a sum which shall not be less than, but which shall not exceed twice, the amount of tax sought to be evaded by reason of the concealment of particulars of his income or the furnishing of inaccurate particulars of such income...."
(Emphasis supplied) At paragraph 35 the Court has held as follows:-
"Penalty to be imposed has to be in commensurate with the gravity of the offence and the extent of the evasion."
At paragraph 31 the Court specifically held that rule 173Q applied to them. Apart from the offending goods which were liable to confiscation the person concerned with that shall be liable to penalty and it has been specifically held that it is difficult to accept the argument of the appellant that levy of penalty is discretionary and it is only the amount of penalty which is discretionary.
6.In this case the facts would reveal that the assessee did not pay the amount and that the meeting held in the Commissioner's room in December 1998 and that at the request of the Commissioner's that the payment was made of course before the issuance of the show cause notice. We also take note of the fact that in an another proceedings, an another officer has by order dated 19.2.2001 did not impose penalty which has been pressed into before us by learned Senior Counsel for the department. In both the orders before us that the impugned order and another order passed by the officer, no reference has been made to the Supreme Court judgment in the case of Zunjarrao Bhikaji Nagarkar v. UOI 1999 (112) ELT 772. In the said judgment it has been specifically held that penalty under rule 173Q is mandatory when the Supreme Court specifically states in paragraph 31 of the Nagarkar's case supra that it is difficult to accept the argument of the appellant that the levy of penalty is discretionary and only the amount of penalty which is discretionary. We are clear in our mind that the imposition of penalty is mandatory and quantum thereof is only discretionary.
7. When that is the position which emerges from the Supreme Court judgment in Nagarkar's case supra, the question to be considered in this case is whether imposition of penalty at the amount fixed in the impugned order could be justified. In paragraph 20 the adjudicating authority has stated as follows:-
"The law nevertheless makes the company liable for the consequences of the offence and factors like lack of internal coordination cannot be accepted as a mitigation of the offence that is proved to have been committed. To accept such a plea would amount to virtually eliminating the company's liability for action."
He fixed the rate which is equivalent to the amount of duty split into the two periods i.e. from 1.4.1994 to 27.9.1996 and from 28.9.1996 to 31.10.1998 after giving effect to the force of section 11AC.
8. As observed by the Supreme Court in the said judgment Zunjarrao Bhikaji Nagarkar in paragraphs 31 and 35, we are of the view that quantum is the discretionary one and we would fix in commensurate with the gravity of the offence and the extent of the evasion. It is true that duty has been paid prior to the issuance of the show cause notice. Lesser penalty would be justified in our view namely Rs. 10 lakhs under Rule 173Q of the Rules and Rs. 10 lakhs under Section 11AC of the Act would suffice, but for this modification the appeal stands dismissed.