2004 (5) TMI 439 - AT - Central Excise

Tribunal Overturns Penalty Order Due to Capacity Determination Inconsistency

The Tribunal set aside the Commissioner's order imposing penalty and demanding interest, citing the inconsistency in the annual production capacity ... Interest and penalty Issues:1. Imposition of penalty and demand of interest by the Commissioner.2. Determination of annual production capacity by the Commissioner.3. Applicability of Rule 96ZO(1)(I)(b) of Central Excise Rules, 1944.4. Failure to pay differential duty and its consequences.5. Claim for re-determination of annual capacity production.6. Validity of penalty and interest imposition in light of Tribunal's decisions.Analysis:1. The appellant challenged the order passed by the Commissioner imposing penalty and demanding interest. The Tribunal found the Commissioner's view strange, especially considering the history of the case where the annual capacity determination by the Commissioner was repeatedly set aside by the Tribunal.2. The Commissioner initially determined the annual production capacity of the appellant's unit at 9600 MT, which was challenged by the assessee before the Tribunal multiple times. Despite several re-determinations by the Commissioner, the Tribunal consistently set aside these orders, questioning the validity of the capacity determination.3. The Commissioner, in the impugned order, relied on Rule 96ZO(1)(I)(b) of the Central Excise Rules, 1944, to impose a penalty on the assessee for failing to pay the required duty amount by the specified date. The Commissioner also directed the payment of interest based on the same rule.4. The Commissioner calculated a differential duty amount that the assessee was required to pay, which they failed to deposit by the due date. Consequently, the Commissioner imposed a penalty on the assessee for this non-compliance, citing the relevant provisions of Rule 96ZO(1)(I) of the Central Excise Rules, 1944.5. The assessee, in a written submission, requested a re-determination of their annual production capacity under sub-section (4) of Section 3A. This request was made during a personal hearing and was a factor considered in the imposition of interest by the Commissioner.6. The Tribunal, after hearing arguments from both sides, set aside the impugned order, highlighting the lack of justification for the penalty and interest imposition by the Commissioner based on an initial capacity determination that had been consistently overturned by the Tribunal. The Tribunal directed the Registry to inform the Chairman, CBEC, of their decision.This detailed analysis of the judgment provides insights into the issues raised, the legal provisions applied, and the Tribunal's reasoning behind setting aside the Commissioner's order.