Neminath Fabrics Pvt. Ltd. vs Commissioner of Central Excise-I

Harsha Devani, J.—By this application, the applicant has prayed to pass appropriate further order in Tax Appeal No. 338 of 2009 Commissioner of Central Excise Vs. Neminath Fabrics Pvt. Ltd., , thereby allowing the option of paying 25% of penalty u/s 11AC of the Central Excise Act, 1944 (hereinafter referred to as "the Act") in favour of the applicant. Pursuant to a show cause notice dated 9-5-2005, an Order-in-Original dated 22-2-2006 came to be passed by the adjudicating authority confirming the central excise duty of Rs. 4,01,693/- with interest u/s 11AB of the Act. Penalty of Rs. 4,01,693/- also came to be imposed u/s 11AC of the Act read with rule 25 of the Central Excise Rules, 2002 (hereinafter referred to as "the Rules"). The applicant carried the matter in appeal before the Commissioner (Appeals) who vide an order dated 25-2-2008, dismissed the appeal. The applicant succeeded in its appeal before the Tribunal, which, by its order dated 26-8-2008, allowed the appeal on the ground of limitation.

Tax Appeal No. 338 of 2009 had been preferred by the respondent challenging the order dated 26-8-2008 [2009 (234) E.L.T. 525 (Tri.)] made by the Customs, Excise & Service Tax Appellate Tribunal (hereinafter referred to as "the Tribunal"). The Court after hearing the learned counsel for the respective parties, had formulated the following substantial question of law:

Whether the Tribunal was justified in importing the concept of knowledge in the provisions of Section 11A of the Central Excise Act, 1944 read with sub-section (1) and the proviso thereto?

The Court after considering the record of the case and the submissions advanced by the learned counsel for the respective parties, was of the view that in the facts of the present case, suppression stood admitted by the assessee and established by evidence on record and as a natural corollary, the proviso to sub-section (1) of Section 11A of the Act would stand attracted. It was, accordingly, held that the Tribunal was not justified in holding that the show cause notice issued beyond the period of six months from the date of knowledge was barred by limitation. The appeal was, accordingly, allowed by quashing and setting aside the order passed by the Tribunal.

Mr. Paritosh Gupta, learned counsel for the applicant submitted that while allowing the Revenue''s tax appeal, the issue of penalty that may have to be paid by the applicant was left out from being considered. It was, accordingly, urged that appropriate further orders regarding penalty u/s 11AC of the Act be made in the interest of justice.

It was pointed out that the proposal to impose penalty on the applicant was made under the show cause notice by invoking Section 11AC of the Act. The original adjudicating authority, viz., the Assistant Commissioner imposed penalty of Rs. 4,01,693/- being an amount equal to the amount of duty u/s 11AC of the Act without giving any option to the applicant herein to pay 25% of the penalty amount as contemplated u/s 11AC of the Act. The Commissioner (Appeals), Surat being the first appellate authority, rejected the appeal of the applicant, but did not extend the option to pay 25% of the penalty amount u/s 11AC of the Act while rejecting the appeal. The Tribunal had allowed the appeal of the applicant and therefore, there was no question of allowing the option to pay 25% of the penalty amount It was submitted that when this court allowed the appeal of the revenue and set aside the order of the Tribunal, the issue of extending the option to pay 25% of the penalty amount remained to be addressed because this option had not been allowed to the applicant by this court while allowing the Revenue''s tax appeal.

The learned counsel submitted that this court in a number of cases, has held that an option to pay 25% of the penalty amount is required to be given to an assessee when an assessee paid the amount of duty with interest and 25% of penalty imposed u/s 11AC of the Act within thirty days of the order determining liabilities and that such option was required to be given to the assessee even in appeal, including a tax appeal if such option was not given to the assessee by the lower authorities. In support of the said submission, the learned counsel placed reliance upon the decision of a Division Bench of this Court in the case of Commissioner - Central Excise and Customs Vs. Bhagyoday Silk Industries, as well as the decision of a Division Bench of this Court in the case of Commissioner of C. Ex. Vs. R.A. Shaikh Paper Mills Pvt. Ltd., .

The learned counsel next submitted that the applicant has deposited the entire amount with duty and interest as well as 25% of penalty. It was pointed out that the judgment and order in the captioned tax appeal came to be delivered by this court on 22-4-2010 and that the same was received by the applicant after a period of about one month. However, in the month of June, 2010 itself, the applicant deposited the entire amount of duty with interest and 25% of the penalty. Copies of challans evidencing deposit of the amount of duty and interest and 25% of penalty have also been placed on record. It was submitted that under the circumstances, in the light of the principles enunciated by this court in the above referred decisions, the benefit of allowing option of paying 25% penalty u/s 11AC of the Act is required to be given to the applicant.

As regards the query raised by the court as to under which provision of law the present application had been made, the learned counsel submitted that such application was made u/s 151 of the Code of Civil Procedure, 1908 (hereinafter referred to as "the Code"). It was vehemently argued that it is a requirement of law as contemplated u/s 11AC of the Act that the assessee is required to be given the benefit of paying 25% of the penalty and what the applicant was claiming, was the benefit under the Act. It was submitted that before the Tribunal, the applicant was contesting the matter on merits and as such, he was not required to raise such an issue. It was submitted that the benefit which flows under the Act was not extended to the applicant by the lower authorities which is otherwise a mandatory requirement of the Act. Reliance was placed upon the decision of the Gauhati High Court in the case of Dharampal Satyapal Ltd. Vs. Union of India (UOI), , for the proposition that when a person is, otherwise, entitled to a relief and the relief is not granted to him and when such a person comes to the court seeking clarification if the court did not mean to grant him the relief, which he was, otherwise, entitled to receive, it must be shown, and the court must be capable of holding, that the relief, though entitled to be received by the person concerned, had been consciously denied to him; or else, the court would be obliged to give relief, which the court had, unmindfully or unconsciously, omitted to give provided that the court has the power to review its own orders/directions and correct errors. In a case of this nature, it would remain the obligation of the court to ensure that the reliefs, which it had unmindfully or unconsciously not made available to the person approaching the court, be made available to him if the law gives the court the power to review.

It was submitted that in the facts of the present case, it is apparent that while allowing the appeal of the Revenue, the applicant ought to have been given an option to pay 25% of the penalty as envisaged u/s 11AC of the Act. However, if for some reason such benefit had not been granted, this court has ample powers to grant the said relief. Reliance was also placed upon a decision of the Bombay High Court in the case of VIP Industries Ltd. Vs. The Commissioner of Central Excise, , for the proposition that the High Court is a Court of record as envisaged under Article 215 of the Constitution, having inherent power to correct record. The court, in the context of Section 35G of the Act, held that the power of review exists in favour of the High Court even in the absence of express provision in the Act conferring power of review.

Vehemently opposing the application, Mr. R.J. Oza, learned Senior Standing Counsel for the respondents invited the attention of the court to the provisions of Section 35G of the Act. It was pointed out that under sub-section (3) thereof, the High Court if it is satisfied that a substantial question of law is involved in any case, it shall formulate that question. Sub-section (4) thereof provides that the appeal shall be heard only on the question so formulated, and the respondents shall, at the hearing of the appeal, be allowed to argue that the case does not involve such question. It was pointed out that under sub-section (5) thereof, the High Court is required to decide the question of law so formulated and deliver such judgment thereon containing the grounds on which such decision is founded. It was submitted that in view of the provisions of Section 35G of the Act, in the absence of a substantial question of law having been framed by the court, it is not open for the court to entertain a plea in respect of an issue which was not raised before it.

The learned counsel further submitted that on the basis of the averments made in the application, the present application cannot be said to be an application u/s 151 of the Code, but an application u/s 152 thereof. Referring to the provisions of Section 152 of the Code, it was pointed out that the same permits the court to correct clerical or arithmetical mistakes in judgments, decrees or orders or errors arising therein from any accidental slip or omission. It was submitted that the ingredients of the said section have not been made out in the present case, so as to call for amendment of the order. It was contended that unless there is a mistake apparent on record, there is no question of invoking the provisions of Section 152 of the Code.

It was next submitted that the applicant had never raised the issue with regard to non-grant of benefit u/s 11AC of the Act either before the adjudicating authority or before the Commissioner (Appeals) and that ultimately after the decision of this court, the applicant had paid an amount of Rs. 7,32,568/- by 14-6-2010, whereas the actual amount due and payable was Rs. 12,20,360/-, thus, there was short payment of Rs. 4,87,792/- and as such the say of the applicant that the entire amount of duty with interest and 25% penalty had been deposited by it is not correct. It was, accordingly, urged that the applicant is not entitled to benefit of the proviso to Section 11AC of the Act and as such, the application deserves to be rejected.

This court has considered the submissions advanced by the learned counsel for the respective parties and has perused the record of the case.

Section 11AC of the Act makes provision for penalty for short-levy or non-levy of duty in certain cases. The proviso thereto lays down that where such duty as determined under sub-section (2) of Section 11A, and the interest payable thereon u/s 11AB, is paid within thirty days from the date of communication of the order of the Central Excise Officer determining such duty, the amount of penalty liable to be paid by such person under the said section be twenty-five per cent of the duty so determined.

As can be seen from the facts noted hereinabove, the applicant is seeking the benefit of the proviso to Section 11AC of the Act. In this regard it may be recalled that the Order-in-Original came to be passed on 22-2-2006. Admittedly, at that point of time the benefit of the proviso was not given to the applicant. The applicant in its appeal before the Commissioner (Appeals), did not make any grievance with regard to non-grant of the said benefit, nor did it deposit the amount of duty with interest and 25% of the penalty as envisaged under the said proviso within a period of thirty days from the date of communication of the Order-in-Original. Under the circumstances, the said point was never at issue in the appeal before the Commissioner (Appeals). In the appeal before the Tribunal against the order of the Commissioner (Appeals) also, the said contention does not appear to have been raised and the order of the adjudicating authority as confirmed by the Commissioner (Appeals), appears to have been assailed only on the point of limitation. Thus, such issue never came up for consideration either before the Commissioner (Appeals) or the Tribunal. Since such issue was never raised before the Tribunal, there is no discussion in this regard in the order of the Tribunal. Consequently, such question did not arise out of the impugned order of the Tribunal and as a natural corollary, no such question was framed by this court while admitting the appeal and deciding the same. Even before this court, such issue was never raised nor was any request made for framing a question of law in this regard. No request was made for grant of the benefit under the proviso to Section 11AC of the Act at the time when the appeal was being allowed. Under the circumstances, no such relief had been granted to the applicant.

Moreover, in the light of the fact that such issue had not been raised before the lower authorities, it cannot be said with certainty that had the relief been prayed for before this court at the time of disposing of the appeal, the same would have been granted to the applicant. The said issue is, therefore, a debatable one. Thus, the relief claimed by the applicant in the present application involves a debatable issue as to whether such relief could be granted by the court in a tax appeal wherein no question of Jaw had been formulated in respect of the issue involved in the present case.

A perusal of the decisions on which reliance has been placed by the learned counsel for the applicant indicates that in those matters, one of the questions of law which was directly in issue between the parties was whether the adjudicating authority was 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 u/s 11AC of the Central Excise Act, 1944. Thus, the said decisions have been rendered in appeals wherein such controversy was directly in issue, which is not so in the facts of the present case. Under the circumstances, in the light of the provisions of Section 35G of the Act and more particularly, sub-section (4) thereof, which postulates that the appeal shall be heard only on the question so formulated, this court is of the view that the applicant is not entitled to the relief prayed for in the present application. In the result, the application fails, and is, accordingly, rejected. Rule is discharged with no order as to costs.