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Judgment
K. Raviraja Pandian, J.—The Department has filed these appeals against the Order of the Customs, Excise and Service Tax Appellate Tribunal, South Zone Bench, Chennai, dated, 3rd April, 2006 made in Final Order Nos. 247 to 249 of 2006 respectively by formulating the following questions of law:
(1) Whether the Tribunal is right in exercising the non-existent element of discretion under Rule 96 ZP(3) of the erstwhile Central Excise Rules, 1944 to reduce the quantum of penalties that was rightly imposed by the Adjudicating Authority and upheld by the lower appellate forum after due process of law and based on the findings that the Respondents had defaulted in payment of duty?
(2) Whether the Tribunal was right in placing reliance upon its own decision in the case of M/s. Sree Lakshmi steel Re-rolling Mills without any reference to the decision of a Division Bench of High Court of Allahabad in the case of Pee Aar Steels Pvt. Ltd., which was prominently quoted by the Commissioner (Appeals) to uphold the penalty imposed by the Adjudicating Authority?
Learned Counsel appearing for the Appellant has brought to the notice of this Court that this Court in an identical set of facts passed an Order on 24th March, 2008 in C.M.A. No. 1032 and 1033 of 2008 against the Department. The said conclusion was reached by this Court after taking into consideration of the relevant provisions i.e., the then existing provisions Rules 96ZP(3) and 96ZO(3) of the Central Excise Rules, 1944 and the similarly worded Section 7(5) of the Entry Tax Act of the State of Madhya Pradesh, which has been considered by the Supreme Court in the case of State of Madhya Pradesh and others Vs. Bharat Heavy Electricals, . We are of the view that it is apropos to extract certain portions of the above referred Judgment of this Court dated, 24th March, 2008:
A very similar worded Section 7(5) of the Entry Tax Act of the State of Madhya Pradesh has been considered by the Supreme Court in the case of State of Madhya Pradesh v. Bharat Heavy Electricals reported in 1998 (89) ELT 44. Section 7(5) of the Entry Tax Act reads as follows:
(5) Where a registered dealer referred to in Sub-section (1) or Sub-section (2) has, in the course of his business, sold local goods to other registered dealers and has failed to make the statement referred to in Sub-section (1) [...], it shall be presumed that he has facilitated the evasion of entry tax on the local goods so sold and accordingly he shall be liable to pay penalty equal to [ten times] the amount of entry tax payable on such goods as if they were not goods of local origin.
The word penalty equal to ten times of the amount of entry tax has been interpreted by the Supreme Court. In paragraphs 12 and 13 of the above referred Judgment, the Supreme Court has held as follows:
It is not necessary for us to decide whether the provision for levy of penalty equal to ten times the amount of entry tax would be confiscatory and, therefore, ultra vires since Mr Sanghi, in fairness, submitted that the State treats it as the maximum limit and not fixed amount of penalty leaving no discretion for imposition of lesser penalty. This stand of the State itself concedes that the Assessing Authorities are not bound to levy fixed penalty equal to ten times the amount of entry tax whenever the provisions of Section 7(5) are attracted. Depending upon the facts of each case the Assessing Authority has to decide as to what would be the reasonable amount of penalty to be imposed, the maximum being ten times the amount of the entry tax. So construed, Sub-section (5) of Section 7 cannot be regarded as confiscatory. Consequently, this also cannot be a ground for holding Section 7(5) to be ultra vires.
From the aforesaid it follows that Section 7(5) has to be construed to mean that the presumption contained therein is rebuttable and secondly the penalty of ten times the amount of entry tax stipulated therein is only the maximum amount which could be levied and the Assessing Authority has the discretion to levy lesser amount, depending upon the facts and circumstances of each case. Construing Section 7(5) in this manner the decision of the High Court that Section 7(5) is ultra vires cannot be sustained.
The above Supreme Court decision has been taken note of by the Tribunal with reference to the facts of the present case while passing the impugned Orders. The circumstances of the case has been explained by saying that it had found an unexplained delay, albeit short, in the payment of duty by the Assessee after receipt of the second abatement Order of the Commissioner. In the circumstances, the Assessee''s prayer for doing away with penalty could not be accepted and after having considered all the facts and circumstances of the case, the Tribunal was of the view that the penalty of Rs. 25,000 would suffice the purpose of Rule 96ZO(3). We find that the reasoning given for reduction of penalty is not extraneous. The Tribunal is having power to reduce the penalty, by taking into the overall situation of the case. The last limb of the provision which states "or five thousand rupees whichever is greater" is a point to the position that the penalty required to the outstanding amount of duty stipulated is only the maximum amount which could be levied and the Authorities have discretion to levy lesser amount depending upon the facts and circumstances of each case.
In a comparable provisions of the Section 125 of the Customs Act, which provides for redemption of fine in lieu of confiscation and also levy of penalty for improper importation of goods u/s 112(a) of the Customs Act, 1962, this Court has taken the same view in T.C.(A) Nos. (sic. C.M.A. Nos.) 127 to 130 of 2008 dated, 31st January, 2008 as the one taken by the Supreme Court....
However, before this Court, learned Counsel appearing for the Revenue has placed reliance on a decision of the Supreme Court in the case of Sony India Limited v. Commissioner of Central Excise, Delhi reported in (2004) 5 SC 751 for consideration.
In the above referred Judgment of this Court dated, 24th March, 2008, this Court has followed the Judgment of the Supreme Court in the case of State of Madhya Pradesh and others Vs. Bharat Heavy Electricals, . That case has also been referred in the decision of the Supreme Court in the case of Sony India Ltd. Vs. Commissioner of Central Excise, Delhi, .
In paragraph No. 7 of the Judgment of the Supreme Court in the case of Sony India Ltd. Vs. Commissioner of Central Excise, Delhi, , the Supreme Court observed as follows:
Now the other aspect that has to be considered is whether penalty imposed u/s 11AC and interest u/s 11AB was justified in the circumstances that arise in the case. The Commissioner had imposed penalty to an extent of Rs. 2,07,64,870.16 equivalent to the duty that was payable by the Appellant. u/s 11AC of the Central Excise Act, the manner in which the whole transaction went on makes it very clear that the Appellant became liable to pay duty under the circumstances which warrant application of the provisions of Section 11A(i) [sic 11A(1) first proviso] and, therefore, we think if the Authorities chose to impose penalty equivalent to duty payable by the Appellant, we do not think, there is any justification for us to interfere with the same. The decisions adverted to by the learned Counsel have different complexions and bearing. These cited cases arose in the circumstances where certain actions had been taken in bona fide belief or the parties were under bona fide doubt as to under what tariff item they had to pay the tax in question or where the Assessee was under bona fide belief that his company was not required to be registered as dealer under the Sales Tax Act. In the present case, earlier the Appellant was paying duty at the rate of 18 per cent ad valorem on the maximum retail price. It is only after 2nd June, 1998 change was sought by the Appellant by not printing the price on the packed goods by removing the same to their depots from their factory in Order to claim that the packed goods had not been priced at the time of their removal from the factory and gifts were offered by the Appellant to indicate that the consideration in the sale transaction was not solely the price. These factors, we think, were rightly taken note of by the Authorities and the penalty imposed need not be considered in the present proceedings.
From the reading of the above observation, we are of the view that the said Judgment cannot be regarded as laying down an absolute proposition of law that wherever the provision gives power to the Authorities concerned to impose penalty equivalent to the duty payable, the Authorities have to impose the maximum penalty and cannot reduce the same depending upon the facts and circumstances of the case.
For the foregoing reasons, the appeals are dismissed. However, there is no Order as to costs.