Commissioner of C. Ex. vs Sunil Silk Mills

These appeals are directed against the judgment and order passed by the CEGAT on 11th November, 2002, exercising the discretion so far the quantification of penalty is concerned. The Commissioner of Central Excise, Mumbai (for short, 'the Commissioner') as also the Tribunal held that in the present case Rule 96ZQ is applicable but the only difference is that while the Commissioner imposed penalty of an amount equivalent to duty, which is 100 per cent, the Tribunal although held that it was a case of Rule 96ZQ of the Central Excise Rules, 1944, and was a case of penalty and exercised its discretion in scaling down the quantum of penalty to Rs. 1 lac only. The aforesaid order of the Tribunal is under challenge in these appeals on which we have heard the learned Counsel appearing for the parties.

Learned Counsel appearing for the Appellant has drawn our attention to the provisions of Rule 96ZQ and relying on the same, he has submitted that the aforesaid provision is mandatory in nature and, therefore, no discretion could have been exercised by the Tribunal, as it was done in the present case.

We may refer to the relevant provision of Rule 96ZQ, which are Sub-rules (3) and (5), which read as follows:

(3) The amount of duty payable under Sub-rule (1) shall be paid, in advance, by the 5th of each calendar month.

Provided that the amount of duty payable for the period from 16th December, 1998 to 31st December, 1998, shall be deposited on or before the 31st Day of December, 1998.

(5) If an independent processor fails to pay the amount of duty or any part thereof by the date specified in Sub-rule (3), he shall be liable to, -

(i) pay the outstanding amount of duty along with interest at the rate of twenty-four per cent per annum calculated for the outstanding period on the outstanding amount; and

(ii) a penalty equal to an amount of duty outstanding from him at the end of such month or rupees five thousand, whichever is greater.

When we read Sub-rule (5) of the said Rule, it gives a clear indication that if there is any failure to pay the amount of duty by the date specified in Sub-rule (3), the Assessee is liable to pay penalty equal to an amount of duty outstanding from him at the end of such month or Rs. 5,000/-, whichever is greater. The expression 'shall' used in the said provision, also indicates that such a provision is mandatory. The same view is also taken in the decision of this Court in Union of India (UOI) and Others Vs. Dharamendra Textile Processors and Others, . After referring to the provisions of Rule 96ZQ in paragraph 15 of the said judgment, this Court considered the submissions of the counsel for the Assessee in the following manner:

The stand of the learned Counsel for the Assessee is that the absence of specific reference to mens rea is a case of casus omissus. If the contention of learned Counsel for the Assessee is accepted that the use of the expression 'Assessee shall be liable' proves the existence of discretion, it would lead to a very absurd result. In fact in the same provision there is an expression used i.e. 'liability to pay duty'. It can by no stretch of imagination be said that the adjudicating authority has even a discretion to levy duty less than what is legally and statutorily leviable.

While concluding, in paragraph 19 of the same judgment, reference was made to the Union Budget of 19961997, whereby Section 11AC of the Central Excise Act, 1944 (for short, 'the Act') was introduced. The said provision has made the position clear that there is no scope for any discretion. In paragraph 136 of the Union Budget, reference has been made to the provision stating that the levy of penalty is a mandatory penalty and that in the Notes on Clauses also the similar indication has been given. That being the position, this Court finally held that the plea that Rules 96ZQ and 96ZO have a concept of discretion inbuilt cannot be sustained.

In the present case also, we are directly concerned with the provisions of Rule 96ZQ. So far. Section 11AC of the Act is concerned, the scope of the said Section was considered by this Court in Union of India (UOI) Vs. Rajasthan Spinning and Weaving Mills, . That decision was rendered in the context of the said provision of Section 11AC. Although, in the said decision reference was made to the decision in Union of India and Ors. v. Dharamendra Textile Processors and Ors. (supra) but the facts remain that in the said decision, particularly in paragraph 34, this Court held that the decision in Dharamendra Textile Processors's case must, therefore, be understood to mean that though the application of Section 11AC would depend upon the existence or otherwise of the conditions expressly stated in the section, but 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 11A. Here is a case where Rule 96ZQ is directly applicable and, therefore, the three-Judges Bench squarely covers this case.

In that view of the matter, we set aside the order passed by the Tribunal and restore the order passed by the Commissioner, leaving the parties to bear their own costs.

The appeals are allowed to the aforesaid extent.