Retrospective enforcement machinery upheld for excise credit recovery, but penalty failed without clear statutory authority.

A retrospective amendment supplying machinery for enforcement of an existing excise/Cenvat obligation was treated as applicable to pending proceedings, because it was procedural and did not create a fresh liability; the demand was therefore held recoverable. The earlier objection that recovery was not possible for want of an express machinery provision was rejected, and the Revenue's position on restoration of the demand was accepted. Penalty, however, could not be sustained for non-payment of the amount in the absence of a clear statutory basis authorising such punishment for the relevant period; the penalty was therefore set aside.

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Issues: (i) Whether the amount equal to 8% of the sale value was recoverable for the period prior to 1 July 2001 in view of the absence of an express machinery provision under the then existing excise law and credit rules, and whether the later amendment operated retrospectively; (ii) whether penalty could be sustained for non-payment of that amount.

Issue (i): Whether the amount equal to 8% of the sale value was recoverable for the period prior to 1 July 2001 in view of the absence of an express machinery provision under the then existing excise law and credit rules, and whether the later amendment operated retrospectively.

Analysis: The later amendment under Section 82 of the Finance Act, 2005 introduced machinery for enforcement of the obligation under Rule 6 of the Cenvat Credit Rules, 2001 and the corresponding provisions under Rule 57-CC and Rule 57-AD of the Central Excise Rules, 1944, with retrospective effect. The amendment was treated as applicable to pending proceedings because it related to procedural enforcement and not to the creation of a fresh liability. The earlier view that recovery was impermissible for want of machinery was therefore not sustainable.

Conclusion: The demand was held recoverable, and the reduction made by the Commissioner (Appeals) was set aside in favour of Revenue.

Issue (ii): Whether penalty could be sustained for non-payment of that amount.

Analysis: The liability to pay the amount under the relevant credit rules stood on a different footing from the power to impose penalty. In the absence of a specific statutory basis supporting penalty for the failure or delay in payment of that amount for the relevant period, the penalty could not be upheld. The absence of challenge by the assessee did not prevent correction of an unsustainable penalty order.

Conclusion: The penalty was held unsustainable and was set aside in favour of the assessee.

Final Conclusion: The appeal succeeded on the recovery issue but failed on the penalty issue, resulting in restoration of the demand while deleting the penalty.

Ratio Decidendi: A retrospective statutory amendment supplying machinery for enforcement of an existing fiscal obligation applies to pending proceedings, but penalty cannot be imposed unless the statute clearly authorises it.

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