Customs, Excise and Gold Tribunal - Delhi
Commissioner Of C. Ex. vs Kuchhal Udyog on 15 September, 1999
Equivalent citations: 2000(115)ELT778(TRI-DEL)
ORDER P.S. Bajaj, Member (J)
1. This appeal has been filed by the Revenue against the order dated 21-10-1998 of the Commissioner (Appeals) who modified the order-in-original of the Additional Commissioner of Central Excise, Ghaziabad by reducing the penalty amount of Rs. 1,09,666.89 to Rs. 50,000/- on an appeal filed before him by the respondents.
2. Facts giving rise to this appeal, may briefly be stated as under :
3. The respondents are registered with the Central Excise department for manufacture of PVC pipes. They had been availing credit facilities of Central Excise duty paid on the inputs used in the manufacture of those pipes. However, on 6-8-1997 when surprise check was made by the Preventive Officers of the Central Excise, shortage in the stock of certain varieties of PVC pipes involving Central Excise duty of Rs. 7015.57 and in the stock of PVC Resin involving Modvat credit of Rs. 1,02,651.32 was detected. The respondents could not offer any plausible explanation of this shortage and they were served with a show cause notice dated 29-9-1997 wherein all these facts were brought to their notice and their reply was sought. That notice was contested by the respondents by alleging that PVC pipes were damaged/broken while handling and on that account shortage took place. Regarding shortage of PVC resin, they alleged that more raw material might have been consumed in the manufacturing process as their workers are not well educated in accounts matters and that has resulted in shortage of raw material. The Additional Commissioner, however, did not feel satisfied with the reply of the respondents and vide order-in-original dated 19-11-1997 demanded Rs. 7015.67 as duty payable on the finished goods found short and disallowed credit of Rs. 1,02,651.32 in respect of PVC resin and imposed a penalty of Rs. 1,09,666.89 under Rule 173Q of the Central Excise Rules read with Section 11AC.
3. The demand of Excise duty was met by the respondents by making debit entry in the RG. 23A/Pt. II Register and the same was treated as adjusted. Similarly, the amount of disallowed Modvat credit was debited in the very register by the respondents and the demand stood adjusted.
4. However, the respondents being aggrieved on account of imposition of penalty on them, filed appeal before the Commissioner (Appeals) against the above said order of the Additional Commissioner. The Commissioner (Appeals) modified the order and reduced the penalty to Rs. 50,000/- on the respondents through the impugned order.
5. The Revenue feeling dissatisfied with this order of the Commissioner (Appeals) has come in appeal before the Tribunal.
6. I have heard.
7. Learned JDR has assailed the validity of the impugned order solely on the ground that the Commissioner (Appeals) had no power to reduce the penalty amount on appeal filed before him by the respondents against the order-in-original of the Additional Commissioner and as such the impugned order passed by him be set aside and the order of the Additional Commissioner be restored.
8. I have given my careful thought to this contention of the JDR but the same in my view is not liable to be accepted. Rule 173Q of the Central Excise Rules only enacts that in case of contravention of the provisions of any of the Rules by a manufacturer, purchaser, by removing any excisable goods in contravention of the provisions of the Rules etc., the goods shall be liable to confiscation and the assessee will be liable to pay penalty not exceeding three times the value of the excisable goods. This rule thus only prescribes the maximum amount of penalty which can be imposed on any assessee by the competent authority in case of contravention of the provisions of any rule. The competent authority is not legally bound in each and every case to impose the penalty three times the value of the excisable goods. The authority has the discretion in the matter of imposition of penalty on the defaulting assessee. The Commissioner (Appeals) after taking into consideration the totality of facts and circumstances had reduced the penalty amount of Rs. 1,09,666.89 as imposed by the Additional Commissioner to Rs. 50,000/-. The respondents had already met the demand of the Excise duty by having debited the amount in the relevant register. They also similarly made the debit entry regarding the Modvat credit in the relevant register. In the absence of evidence to suggest that the respondents had wilfully removed the excisable finished goods from the factory and misused the inputs received, the penalty imposed on them could be reduced by the Commissioner (Appeals). The discretion exercised by him cannot in any manner be said to be arbitrary and non-judicious.
9. No doubt, Section 11 AC of the Central Excise Act mandates that the penalty for the short levy or non-levy of the duty, shall be equal to the duty so determined, but from this it cannot be in any manner inferred that the penalty under any circumstances cannot be less than that. This Section only provides the maximum penalty which can be imposed on the defaulting assessee and cannot be said to be mandatory. In this context, reference may be made to State of Madhya Pradesh v. Bharat Heavy Electricals reported in 1998 (99) E.L.T. 33 (S.C.). That was a case under Section 7(5) of the Madhya Pradesh Sthaniya Kshetra Me Mal Ke Pravesh Par Kar Adhiniyam, 1976 which laid down that the assessee shall be liable to penalty equal to the ten times of the amount of entry tax in case of default. The provisions of Section 7(5) of that Act are akin to the provisions of Section 11AC of Central Excise Act and Section 114A of the Customs Act. Considering the provisions of all these Acts, the Apex Court was pleased to observe that the expression "shall be liable to pay penalty" only connotes that maximum amount of penalty could be levied by the assessing authority to that extent. The penalty amount mentioned therein was not mandatory but only maximum. In view of this law laid down by the Apex Court, the Commissioner (Appeals) was thus competent to reduce the penalty amount and the power exercised by him in doing so in the instant case cannot be questioned by the Revenue especially when he has acted judicially and not arbitrarily.
10. No other point has been raised before me.
11. In the light of the above discussion, there is no merit in the appeal of Revenue and as such the appeal is dismissed.