2008 (11) TMI 573 - AT - Central Excise

Tribunal upholds penalty for duty default under compounded levy scheme. Legislative intent clarified.

The Tribunal upheld the penalty imposed on the appellants for default in payment of duty under the compounded levy scheme. The penalty provision under ... Penalty - Compounded Levy Scheme Issues:The judgment deals with the penalty imposed on the appellants for default in payment of monthly duty under the compounded levy scheme u/s Rule 96ZP of the Central Excise Rules 1944.Issue 1: Definition of 'duty' under the compounded levy schemeThe appellant argued that the penalty was not sustainable as the term 'duty' for the compounded levy scheme was defined only on 1-3-2000. However, the penalty imposed was in accordance with the rule which required payment of duty by the 10th day of the month.Issue 2: Interpretation of penalty provision under Rule 96ZPThe Respondent contended that the penalty for failure to pay duty in the concerned month is clearly defined in Rule 96ZP(3) proviso (ii) and is equal to the duty outstanding or Rs. 5000, whichever is greater. The Apex Court's interpretation of similar provisions in other rules supported the imposition of the penalty as prescribed.Judgment:The Tribunal noted that the penalty provision under Rule 96ZP was similar to Rule 96ZO and both mandated the payment of duty along with interest and a penalty equal to the outstanding duty. The legislative intent, as per Section 11AC, was clear that the penalty should be equal to the duty demanded. The Tribunal found no ambiguity in the penalty provision and upheld the penalty imposed on the appellants for default in payment of duty. The argument that the term 'duty' was defined only later was deemed unreasonable as the appellants were aware of their duty liability under the scheme. Therefore, the appeal challenging the penalty was dismissed.