Gujarat High Court
The vs Daman on 24 February, 2010
Author: K.A.Puj
Bench: K.A.Puj
Gujarat High Court Case Information System
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TAXAP/460/2008 14/ 14 JUDGMENT
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX
APPEAL No. 460 of 2008
For
Approval and Signature:
HONOURABLE
MR.JUSTICE K.A.PUJ Sd/-
HONOURABLE
MR.JUSTICE RAJESH H.SHUKLA
Sd/-
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1.
Whether
Reporters of Local Papers may be allowed to see the judgment ?
YES
2.
To
be referred to the Reporter or not ?
NO
3.
Whether
their Lordships wish to see the fair copy of the judgment ?
NO
4.
Whether
this case involves a substantial question of law as to the
interpretation of the constitution of India, 1950 or any order
made thereunder ?
NO
5.
Whether
it is to be circulated to the civil judge ?
NO
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THE
COMMISSIONER OF CENTRAL EXCISE & CUSTOMS, DAMAN - Appellant
Versus
DAMAN
POLYTHREAD LTD. - Opponent
======================================
Appearance
:
MR
RJ OZA for Appellant.
MR PR NANAVATI for
Opponent.
======================================
CORAM
:
HONOURABLE
MR.JUSTICE K.A.PUJ
and
HONOURABLE
MR.JUSTICE RAJESH H.SHUKLA
Date
: 24/02/2010
ORAL JUDGMENT
(Per : HONOURABLE MR.JUSTICE K.A.PUJ) The Commissioner of Central Excise & Customs, Daman has filed this tax Appeal under Section 35G of the Central Excise Act, 1944 proposing to formulate the following substantial questions of law for determination and consideration of this Court :-
Whether in the facts and circumstances of the present case, the Tribunal is justified in setting aside the penalty imposed under Section 11AC read with Rule 13 (2) of the Cenvat Credit Rules, 2002 which penalty is mandatory in nature ?
Whether in the facts and circumstances of the present case, the Tribunal is justified in law in taking a lenient view and in setting the penalty more particularly when the adjudicating authority had imposed penalty and that there were no grounds warranting the setting aside of the penalty, more particularly when the penalty is mandatory in nature ?
This appeal was admitted on 19.02.2009 and the following substantial question of law was framed by this Court :-
Whether in the facts and circumstances of the present case, the Tribunal is justified in setting aside the penalty imposed under Section 11AC read with Rule 13 (2) of the Cenvat Credit Rules 2002, which penalty is mandatory in nature ?
The appellant thereafter moved OJCA No. 64 of 2010 for final hearing of Tax Appeal, which was granted and Tax Appeal No.460 of 2008 is fixed for final hearing today i.e. 24.02.2010.
The appellant thereafter moved OJCA No.89 of 2010 for amendment proposing new questions of law, which is also granted by a separate order dated 24.02.2010.
By moving amendment, the appellant has proposed the following substantial questions of law for the determination of this Court :-
Whether or not benefit of reduced penalty under proviso to Section 11 AC of the Central Excise Act, 1944 can be extended to such person who has not paid amount of interest determined by the adjudicating authority payable under Section 11AB of the Central Excise Act, 1944 ?
Whether or not benefit of reduced penalty under proviso to Section 11AC of the Central Excise act, 1944 can be extended to such person who has paid, before issuance of show cause notice only duty determined by the adjudicating authority payable under Section 11A(2) of the Central Excise Act, 1944 ?
Whether the adjudicating authority is statutorily obliged to set out in his order the availability of benefit of reduced penalty prescribed under proviso to Section 11AC of the Central Excise Act, 1944 and to give option to such person liable for penalty under Section 11AC of the Central Excise Act, 1944 ?
Whether in the facts and circumstances of the case, the Tribunal is justified and has committed substantial error of law in placing reliance on the decision rendered by the Hon'ble High Court in the case of CCE v. Malbro Appliances P. Ltd., reported in 2007 (79) RLT 109 (Del) / 2007 (208) ELT 503 (Delhi) and in case of K. P. Pouches Pvt. Ltd., reported in 2008 (85) RLT (483) (Delhi) / 2008 (228) ELT 31 (Del) ?
Whether the impugned order made by the Tribunal can be said to be an order in accordance with law?
Whether in the facts and circumstances of the present case, the Tribunal is justified in setting aside the penalty imposed under Section 11AC read with Rule 13 (2) of the Cenvat Credit Rules, 2002 which penalty is mandatory in nature ?
Whether in the facts and circumstances of the present case, the Tribunal is justified in law in taking a lenient view and in setting the penalty more particularly when the adjudicating authority had imposed penalty and that there were no grounds warranting the setting aside of the penalty, more particularly, when the penalty is mandatory in nature ?
Heard Mr. R. J. Oza, learned Standing Counsel appearing for the Revenue and perused the order passed by the authorities below.
Mr. Oza has submitted that the Tribunal has not recorded any cogent reasons for setting aside penalty imposed on the respondent even though the respondent has not made payment of interest for delayed payment of duty within 30 days from receipt of order of the adjudicating authority nor has paid amount of penalty determined by the adjudicating authority under Section 11AC of the Act. He has further submitted that it was found in course of the audit of the records maintained by the Unit that it has availed wrongful Cenvat Credit of Rs.4,41,724/- for the period between January 2001 to May 2001. The respondent Unit debited amount of Rs.4,41,724/- under RG 23A Pt. II on 23.07.2004. However, no interest was paid by the respondent and, therefore, a show-cause notice demanding interest and proposing imposition of penalty on the respondent was issued on 25.05.2005. The Adjudicating Authority by an order dated 26.12.2005 confirmed demand of interest of Rs.2,57,285/- on delayed payment of amount of Rs.4,41,724/-, the Cenvat credit wrongly availed by the unit and directed to recover the said amount under Section 11B of the Act in terms of Rule 12 of Cenvat Credit Rules, 2001 and also imposed penalty of Rs.4,41,724/- on the respondent under Rule 13 (2) of the Cenvat Credit Rules, 2002. The respondent preferred appeal against the order in original and the Appellate Commissioner by an order dated 01.08.2006 modified the order reducing penalty from Rs.4,41,724/- to Rs.25,000/- and confirming demand of interest made by the adjudicating authority. The respondent preferred appeal before the Tribunal and the Tribunal vide impugned order dated 27.07.2007 set aside the order of imposition of penalty and also set aside levy of interest except for amount of Rs.18,201/- which was due and payable on 29.09.2001. Mr. Oza has further submitted that the impugned judgment of the Tribunal is contrary to settled propositions of law laid down by the Hon'ble Supreme Court in the case of Rajasthan Spinning Mills as well as Dharmendra Textiles and further contrary to the specific observations made by this Court in Tax Appeal No.140 of 2008 and Special Civil Application No.22931 of 2005.
Mr.Oza has submitted that the respondent has not complied with the preconditions for availment of benefit of reduced penalty under proviso to Section 11AC of the Central Excise Act, 1944 and, therefore, the impugned order of the Tribunal is liable to be set aside.
Mr. Oza further submitted that the decision of the Delhi High Court in the case of K. P. Pouches (P) Ltd., reported in 2008 (228) ELT 31 (Del), cannot be applied to the case of the respondent inasmuch as in the case of K.P. Pouches (P) Ltd., (Supra) the adjudicating authority has not ordered recovery of interest under Section 11AB of the Central Excise Act, 1944 because in the said case the assessee had deposited total amount of duty payable under Section 11A(2) of the Act on the date of detection of evasion of duty itself. He has further submitted that the decision in the case of Malbro Appliances P. Ltd., reported in 2007 (208) ELT 503 (Del), also cannot be applied because the facts of the case on hand are not identical to the facts of the case of the assessee in the Malbro Appliances P. Ltd., (Supra).
On the contrary, in view of settled proposition laid down by the Punjab and Haryana Court in the case of Machino Montell (I) Ltd., reported in 2006(4) STR 177 (P & H) as well as judgments of the Apex Court in the case of Rajasthan Spinning & Weaving Mills, reported in 2009(238) ELT 3 (SC), Dharmendra Textile Processors, reported in 2008 (231) ELT 3 (SC), and decisions of the Tribunal in the case of Jawala Steels Pvt. Ltd., reported in 2009 (238) ELT 694 (Tri Kolkata), and Ponneri Steel Industries, reported in 2009 (238) ELT 295 (Tri Chennai) and such other cases, the Tribunal was required to allow department to levy penalty on the respondent for the amount equivalent to his duty liability and pass order accordingly.
Mr. Oza has further submitted that the impugned order of the Tribunal is in disregard of the law laid down by this Court in Tax Appeal No.140 of 2008 and Special Civil Application No.22931 of 2005 and such other judgments, which obligate upon the Tribunal to record cogent reasons in support of conclusion arrived at by him in passing the final order. In support of this submission Mr.Oza also relied on the following decisions (I) Coats Viyella India Ltd., Vs. Commissioner of Central Excise, 2004 (133) ELT 229 (SC) (ii) TATA Engineering & Locomotive Co. Ltd., Vs. Collector of Central Excise, 2006 (203) ELT 360 (SC) (iii) Commissioner of Central Excise Vs. Wimco Ltd., 2007 (217) ELT 3 (SC) (iv) Commissioner of Central Exicse Vs. GTC Industries Ltd., 2008 (228) 505 (SC) (v) Commissioner of Central Excise Vs. Srikumar Agencies 2008 (232) 577 (SC) (vi) Stead Fast Paper Mills Vs. Collector of Central Excise, 1983 (12) ELT 744 (Guj.).
We have considered the submissions made by Mr.Oza and also perused very minutely the order passed by the authorities below. As a matter of fact, all these questions reframed by Mr.Oza are different facets of the main question as to whether the Tribunal is justified in deleting the penalty levied on the respondent. So far as the aspect regarding levy of penalty under Section 11AC of the Act to the extent of 25% is concerned, it is already considered by this Court in its order dated 18.11.2009 in the case of Messers Exotic Associates Vs. Commissioner of Central Excise (Tax Appeal No.572 of 2007 with Tax Appeal No.869 of 2007 and Tax Appeal No.1942 of 2008, in the case of Commissioner of Central Exicse & Customs Vs. Rama Synsilk Mills P. Ltd., decided on 21.1.2010. This Court after considering the decision of Commissioner of Central Excise Vs. Malbro Appliances, 2007 (79) RLT 109 (Delhi), Union of India Vs. Dharmendra Textiles, 2008 (231) ELT 3 (SC), Union of India Vs. Rajasthan Spinning & Weaving Mills, 2009 (238) ELT 3 (SC), K. P. Pouches (P) Ltd., Vs. Union of India, 2008 (228) ELT 31 (Delhi), Commissioner of Central Excise, Rohtak Vs. J. R. Fabrics Pvt. Ltd., 2009 (238) ELT 209, has taken the view that the order passed by the Tribunal retaining the penalty of 25% of the duty amount seems to be quite justified. For the reasons recorded in the said two judgments, we do not feel it necessary to take any different view in this Appeal.
However, the question involved in this appeal is somewhat different. The Tribunal has not reduced the penalty to 25% of the duty amount but deleted the penalty of Rs.25,000/- sustained by Commissioner (Appeals). The adjudicating authority imposed penalty of Rs.4,41,724 under Rule 13 (2) of Cenvat Credit Rules, 2002. The Commissioner (Appeals) reduced the said penalty to Rs.25,000/-. The respondent assessee challenged the said order before the Tribunal and the Tribunal deleted the said appeal. Thus, the present appeal is merely confining to the Revenue's challenge to the deletion of the penalty of Rs.25,000/-. Even if this appeal is allowed, the penalty of Rs.25,000/- is restored. However, looking to the smallness of the amount, we do not entertain this appeal.
We however, make it clear that if the Revenue has challenged the Commissioner (Appeal)'s order before the Tribunal and in that Appeal, the Tribunal would not restore the penalty to the extent of 25% of the duty amount, it is open for the Revenue to challenge such order before this Court and in that eventuality, the present order would not come in the way of the Tribunal.
Subject to the above, this Tax Appeal is dismissed.
Sd/-
[K. A. PUJ, J.] Sd/-
[RAJESH H. SHUKLA, J.] Savariya Top