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Issues: (i) Whether the amended Rule 57AB of the Central Excise Rules, 1944 operated retrospectively so as to require duty on inputs cleared as such for the period prior to 1-3-2001; (ii) Whether penalty was leviable, and if so, whether it could be reduced in the facts of the case.
Issue (i): Whether the amended Rule 57AB of the Central Excise Rules, 1944 operated retrospectively so as to require duty on inputs cleared as such for the period prior to 1-3-2001.
Analysis: The pre-amendment Explanation to Rule 57AB required payment of duty when inputs or capital goods were removed from the factory, but the amendment substituting the rule was effective from 1-3-2001. The notification did not expressly state that the amendment was retrospective. The earlier Larger Bench interpretation of the analogous rule was applied to the period before the amendment, and the legal fiction could not be extended beyond the statutory text.
Conclusion: The demand of duty for the period from 20-1-2001 to 28-2-2001 was not sustainable.
Issue (ii): Whether penalty was leviable, and if so, whether it could be reduced in the facts of the case.
Analysis: The duty liability for the later period had been discharged before issuance of the show cause notice, but removal had been made without payment of appropriate duty. The penalty provision was treated as mandatory in principle, though the quantum remained within discretion. The voluntary payment and prompt compliance were treated as mitigating circumstances.
Conclusion: Penalty was leviable, but it was reduced to a nominal amount of Rs. 15,000/-.
Final Conclusion: The appeal succeeded to the extent of setting aside the duty demand for the pre-amendment period, while the penalty was sustained in reduced form.
Ratio Decidendi: An amendment affecting duty liability is not to be applied retrospectively unless the statute or notification expressly so provides, and penalty may be imposed for removal without appropriate duty though its quantum may be moderated on the facts.
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