Commissioner of Cus. and C. Ex., Meerut vs Corrufab Pvt. Ltd.

We have heard Sri R.C. Shukla, for the appellant. No one appears for the respondent. The appellant-Central Excise Department has filed this appeal against the order of the Commissioner (Appeals), Customs & Central Excise, Meerut dated 28-1-2004, and the order of the Customs, Excise & Service Tax Appellate Tribunal, New Delhi dated 23-2-2005 [2005(192) E.L.T. 645 (Tri.-Del.)] by which the penalty imposed by the Adjudicating Authority under Rule 96-ZP of the Central Excise Rules 1944, was reduced by the Appellate Authority from Rs. 2,14,502/- to the amount of duty payable i.e. at Rs. 35,377/-, and thereafter by the Tribunal to Rs. 10,000/-.

The Tribunal held that non-payment of differential duty was not deliberate. The assessee had closed the mill permanently on 31-10-1997, of which due intimation was given by them to the Revenue. In the circumstances duty for only two months i.e. September and October 1997, could be demanded from them.

The appeal has been preferred on the following substantial questions of law:-

(i) Whether abatement of duty for the closure period can be allowed to the assessee who did not follow the prescribed procedure under Rule 96ZP(2) of the Central Excise Rules, 1944?

(ii) Whether lesser penalty other than mandatory penalty equal to the amount of duty provided under Rule 96ZP(3) of the aforesaid Rules can be imposed by the Tribunal?

Sri R.C. Shukla, relied on a judgment of this Court in Commissioner of Customs and Central Excise Vs. M/s. Majestic Auto Ltd., deciding the question of law-''as to whether the Tribunal, in its discretion could reduce the amount of penalty as specified u/s 11AC Central Excise Act, 1944'', and held that the Tribunal had no such jurisdiction to reduce the penalty.

In the present case, the facts are not same, as in the case of M/s. Majestic Auto Ltd.

Admittedly, in the present case, the assessee opted for payment of duty under Rule 96ZP(3). The duty liability of the assessee was determined u/s 3A of the Central Excise Act, 1944, on the basis of annual capacity of production i.e. 1453 MT. The monthly duty liability was thus worked out at Rs. 35,825/- For the period from 1-9-1997 to 31-3-1998, the assessee was required to pay the Central Excise Duty of Rs. 2,50,775/-. It paid only Rs. 36,273/-. A demand notice was issued for payment of Rs. 2,14,502/- being short paid duty amount, which was confirmed by the Adjudicating Authority, and also imposed a penalty of Rs. 2,14,502/-.

The Appellate Authority found that it was a determination of duty u/s 3A of the Central Excise Act, 1944, on the basis of annual capacity of production. The unit of the assessee remained in operation only for two months i.e. September and October 1997 and was closed from 31-10-1997, thus duty liability on the assessee would be for two months only. Taking into account the Annual Capacity of Production, the duty liability for two months was worked out to Rs. 71,650/- i.e. @ Rs. 35,825/- per month, and since the appellant had paid Rs. 36,273/-, the total liability was fixed at Rs. 35,377/-, and accordingly the penalty under Rule 96ZP was reduced to Rs. 35,377/-.

The Customs, Excise & Service Tax Appellate Tribunal held that the unit of the assessee was closed permanently on 31-10-1997, of which due intimation has been given by respondent, and thus the duty for only two months i.e. September and October, 1997 could be demanded from them. ''The short paid'' duty for these two months was only of Rs. 35,377/-. The Tribunal found that ''non-payment of differential duty was not deliberate. It was on account of closure of their unit permanently.'' The Tribunal partly allowed the appeal of the assessee, and dismissed the appeal of the Revenue.

In case, a manufacturer does not produce non-alloyed hot re-rolled steel during any continuous period of not less than seven days and wishes to claim abatement u/s 3A of the Act, he has to give intimation under Rule 96ZP(2) about closure of the units-either prior to the date of closure, or on the date of closure. If the manufacturer starts production again, he is required to give intimation about the same-either prior to the date of starting production or on the date of starting production. In the present it is not denied, nor there was any material to show that the factory continued production after October, 1997. Even if the intimation was given subsequently, unless there was some material to show that the factory had run for a period beyond those two months i.e. after September and October, 2007, the penalty could not be levied.

In Union of India (UOI) Vs. Rajasthan Spinning and Weaving Mills, and State of Madhya Pradesh and others Vs. Bharat Heavy Electricals, , it was held that penalty u/s 11AC of the Act can be imposed only when conditions mentioned in Section 11AC exist. The authorities do not have discretion in fixing the penalty, and that where the penalty is impermissible, it cannot be levied equal to the duty u/s 11AC of the Act.

In the present case, since the Tribunal recorded the findings that the penalty itself was not leviable. The Tribunal, therefore, erred in reducing the amount of penalty. Since the assessee has not filed the appeal, there is no question of granting any relief to it. The appeal is dismissed.