Custom, Excise & Service Tax Tribunal
M/S Bhushan Industries Ltd vs Cce, Chandigarh on 30 September, 2011
IN THE CUSTOMS, EXCISE & SERVICE TAX
APPELLATE TRIBUNAL
West Block No. 2, R.K. Puram, New Delhi 110 066.
Date of Hearing : 30.9.2011
Date of Pronouncement :
Excise Appeal No. 2863 of 2009-SM
[Arising out of Order-in-Original No. 51/CE/CHD-I/2009 dated 2.9.2009 passed by the Commissioner, Central Excise, Chandigarh]
Coram:
Honble Shri Mathew John, Technical Member
1. Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it would be released under Rule 27 of the CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether their Whether their Lordships wish to see the fair copy of the order?
4. Whether order is to be circulated to the Department Authorities?
M/s Bhushan Industries Ltd. Appellant
Vs.
CCE, Chandigarh Respondent
Appearance:
Appeared for Appellant : Shri Gagan Kohli, Advocate
Appeared for Respondent : Shri A. Khanna, DR
Coram:
Honble Shri Mathew John, Member (Technical)
Order No.dated.
Per Mathew John:
The Appellants were operating an induction furnace for manufacturing non alloy steel ingots and billets. During 1997-98, and part of 1998-99 they were paying excise duty based on Annual Production Capacity of the unit based on Rule 96ZO of the Central Excise Rules, 1944. Due recession in demand they had closed down their factory during the period 10-01-1998 to 08-04-98 and claimed abatement from duty liability as provided in Rule 96ZO (2) for the said period. However they gave the details of their stock position of notified goods and electricity meter reading as required under the rule only on 14-01-1998. Since the Appellants did not pay duty for the period 10-01-98 and 08-04-98, a Show Cause Notice was issued demanding duty not paid for the period along with interest applicable. Further penalties under the third proviso and fourth proviso of Rule 96ZO (3) (ii) were imposed.
2. The matter was adjudicated demanding duty amounting to Rs. 1,29,032/- for the period 10-01-1998 to 13-01-1998 and penalties equal to 1,29,032/- each under the said provisos were imposed. For rest of the closure period abatement as claimed was allowed. Aggrieved by the order, disallowing the claim for 4 days, the Appellants have filed this appeal.
3. The submission on behalf of the Appellants is that 10-01-98 and 11-01-98 were holidays (Saturday and Sunday) and that is the reason why they were not able to give the necessary declaration under Rule 96ZO (3). At any rate they contest that the fact that they were closing down their factory was intimated to the Range Office on 13-01-98 and the Sector Officer had come to the factory and found it closed and he took the meter reading showing electricity consumption. It was the same reading and the stock position as at close of 09-01-08 which has been communicated to the Range Officer on 14-01-98. Their prayer is that at least for 13-01-98 they should be given abatement.
4. Further in the matter of penalty, the Counsel argues that there is no justification for imposing penalty twice under the two clauses of the same proviso. Further he argues that this is not a situation where there was any malafide intention on the part of the Appellant and they themselves have come forward and declared the facts and therefore penalty itself is not justified and the penalties should be waived. Thus in brief they would be willing to pay duty amounting to Rs.96774/- for a closure of the matter, though grudgingly.
5. The Ld DR on the other hand points out that under Rule 96 ZO (3) abatement can be given only if closure of unit is reported along with details of closing stock and reading of electricity meter. This has been done only on 14-01-98 and from this date the Commissioner has already given abatement for the closure period. So he argues that no further abatement is due.
6. In the matter of penalties he relies on the decision of the Honorable Supreme Court in the case of UOI Vs. Dharmendra Textiles Processors -2008 (231) ELT 3 (SC) and argues that the penalties prescribed under Rule 96 ZO (3) are statutory penalties without any regard to mens rea. Once a person opts for the compounded levy scheme the assesse has to bear with all the consequences of the scheme and when nonpayment of duty due as per the rules is noticed the penalties as imposed under the impugned order is payable. He also relies on the decision of the Apex Court in CCE Vs. Venus castings (P) Ltd- 2000 (117) ELT 273 SC.
7. At this stage the Counsel for the Appellants submit that the Honorable apex Court decided that in the matter of statutory penalty prescribed without any reference to mens rea such penalty will be payable whether or not such liability arose due to any malafide act. But the question whether such penalty can be imposed under provisions of a subordinate legislation like Rule 96ZO(3) was left open by the Apex Court to be decided by the division bench. He relies on para 27 of the decision which reads as under:
27. Above being the position, the plea that the Rules 96ZQ and 96ZO have a concept of discretion inbuilt cannot be sustained. Dilip Shroffs case (supra) was not correctly decided but Chairman, SEBIs case (supra) has analysed the legal position in the correct perspectives. The reference is answered. The matter shall now be placed before the Division Bench to deal with the matter in the light of what has been stated above, only so far as the cases where challenge to vires of Rule 967Q(5). In all other cases the orders of the High Court or the Tribunal, as the case may be, are quashed and the matter remitted to it for disposal in the light of present judgments. Appeals except Civil Appeal Nos. 3388 of 2006, 3397 of 2003, 3398-99 of 2003, 4096 of 2004, 4316 of 2007, 4317 of 2007, 5277 of 2006, 675 of 2007, 1420 of 2007 and appeal relating to SLP (C) No. 21751 of 2007 are allowed and the excepted appeals shall now be placed before the Division Bench for disposal.
8. He then points out that the virus of the rule was decided by the Honorable Punjab and Haryana Court in Bansal Alloys & Metals Pvt. Ltd Vs. UOI-2010 (260) ELT 343 (P &H) and the Court held that the Rules prescribing such penalty were ultra virus the provisions of the Act. He relies on para 16 and 17 of the order which read as under:
16. For the above reasons, we hold that the impugned provision to the extent of providing for mandatory minimum penalty without any mens rea and without any element of discretion is excessive and unreasonable restriction on fundamental rights and is arbitrary. Moreover, exercise of such power by way of subordinate legislation is not permissible when rule making authority for levying penalty is limited to default with intent to evade duty.
17. The writ petitions of the assessees are allowed and impugned provisions in Rules 96(ZO), (ZP) and (ZQ) permitting minimum penalty for delay in payment, without any discretion and without having regard to extent and circumstances for delay are held to be ultra virus the Act and the Constitution. In CWP No. 8555 of 2010, penalty has been sustained by the Tribunal to the extent of 100% which will stand quashed without prejudice to any fresh order being passed in accordance with law. It is made clear that if penalty has attained finality as in CWP No. 18099 of 2009 up to this Court, this order will not affect the finality of such order. The appeals filed by the revenue against the orders of the Tribunal sustaining penalty proportionate to the default will stand dismissed.
9. The Counsel further points out the above decisions are subsequent to the decision of Venus Casting (Supra) and therefore the latest decision of the Apex Court should prevail. He also points out that this matter has been considered by the Tribunal in the case of CCE Jaipur Vs. M/s Rathi Bars in Final Order No. 301-302/ 2011-EX dated 03-03-2011 that penalties under the Rule can be imposed only if there is mens rea. So he argues that there is no case for imposing penalty.
10. From the facts of the case I am convinced that there was no malafide intention on the part of the Appellants for evading duty. Further I also find that the intimation was given on 13-01-1998 and the departmental officer had come and taken the meter reading on 13-01-98, though the meter reading as taken by the officer was communicated by the Appellant in writing only on 14-01-1998. Therefore there is no case to deny the abatement for 13-01-98.
11. In the fact and circumstances of the case and following the decision of the Punjab Haryana High Court in the case of Bansal Alloys (Supra) I hold that no penalty is payable in this case since no mens rea is attributable.
12. So the duty confirmed against the appellants is reduced to Rs.96,774/-. Interest as applicable under the Rules is also to be paid. Penalties confirmed by the impugned order are set aside.
(Pronounced on_______________) (Mathew John) Member (Technical)