Retrospective penalty under excise rules barred; ex parte challenge failed where the record did not support denial of hearing.

A belated objection that the production-capacity determination and resulting demand were made ex parte failed where the record showed no specific appeal ground, no protest after the communication, and no challenge to the representation order. Equal penalty under Rule 96ZO(3) of the Central Excise Rules, 1944 could not be imposed for any period before 1 May 1998, because a penal provision cannot operate retrospectively without clear legislative intent. The demand and related findings were left undisturbed, but the penalty was confined to the post-commencement period and set aside for the earlier period.

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Issues: (i) Whether the challenge to the determination of production capacity and the consequential demand could be sustained on the ground that the representation was decided ex parte and without hearing the assessee. (ii) Whether equal penalty under Rule 96ZO(3) of the Central Excise Rules, 1944 could be imposed for the period prior to the date on which the penal provision came into force.

Issue (i): Whether the challenge to the determination of production capacity and the consequential demand could be sustained on the ground that the representation was decided ex parte and without hearing the assessee.

Analysis: The record did not support the plea of ex parte disposal. The assessee had not raised a specific ground in the appeal, had not protested after receipt of the communication dated 5 August 1998, and had not challenged the order on the representation. The earlier abatement claim was also rejected without challenge. In these circumstances, the allegation of denial of hearing was found to be without substance.

Conclusion: The challenge on the ground of ex parte proceedings was rejected.

Issue (ii): Whether equal penalty under Rule 96ZO(3) of the Central Excise Rules, 1944 could be imposed for the period prior to the date on which the penal provision came into force.

Analysis: The penalty provision under Rule 96ZO(3) came into force only on 1 May 1998, while the demand covered the period from September 1997 to December 1998. A penal provision cannot operate retrospectively unless the statute clearly so provides. The earlier period, therefore, could not be subjected to equal penalty under that rule, though the provision could apply to the period after its commencement.

Conclusion: Penalty under Rule 96ZO(3) could not be sustained for the period prior to 1 May 1998.

Final Conclusion: The demand and other consequential findings were left undisturbed, but the penalty was confined to the post-commencement period and set aside for the earlier period.

Ratio Decidendi: A penal provision cannot be applied retrospectively in the absence of clear legislative intent, and a belated plea of denial of hearing unsupported by the record cannot invalidate the proceedings.

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