2011 (5) TMI 780 - AT - Central Excise

Tribunal upholds penalty for non-payment of duty under Central Excise Rules

The Tribunal upheld the penalty imposed on the appellant under Rule 96ZQ(5)(ii) of the Central Excise Rules, emphasizing the mandatory nature of the ... Compounded Levy Scheme – Held that:- appellant had themselves opted for discharge of duty liability under the Compounded levy scheme of Rule 96ZQ of the Central Excise Rules, under which duty liability had been determined by the Commissioner, based on their capacity of production under the provisions of Hot Air Independent Textile Processors Annual Capacity Determination Rules, 1998, in the cases of Dharamendra Textiles Processors (2008 - TMI - 31520 - SUPREME COURT - Income Tax), there is no infirmity in the impugned order imposing penalty on the appellant under Rule 96ZQ(5)(ii) of Central Excise Rules, 1944. The appeal dismissed Issues:1. Imposition of penalty under Rule 96ZQ(5)(ii) of the Central Excise Rules based on failure to discharge duty liability under Compounded Levy Scheme.Analysis:The case involved an appeal challenging the imposition of a penalty under Rule 96ZQ(5)(ii) of the Central Excise Rules. The appellants, engaged in processing textile fabrics, had opted for duty liability discharge under the Compounded Levy Scheme. The dispute arose when the department alleged non-payment of full duty liability for a specific period and demanded duty, interest, and penalty. The Commissioner's order dropped the duty demand but confirmed interest and imposed a penalty of Rs. 7,60,000 under Rule 96ZQ(5)(ii). The appellant argued that penalty imposition was invalid as the Hot Air Independent Textile Processors Annual Capacity Determination Rules, 1998, were held ultra vires. However, the department defended the penalty citing the Supreme Court's decision in Union of India v. Dharamendra Textile Processors, emphasizing the mandatory nature of the penalty provision.The Tribunal considered the submissions and records, noting that the appellants had chosen the Compounded Levy Scheme, and the duty liability was determined based on their production capacity under the Annual Capacity Determination Rules. The Tribunal highlighted the Supreme Court's ruling in Union of India v. Dharamendra Textile Processors, emphasizing the lack of discretion for lower penalties under Rule 96ZQ(5)(ii). Referring to a similar case, the Tribunal upheld the penalty equal to the outstanding duty liability, citing precedents and recent Supreme Court judgments. The Tribunal dismissed the appeal, concluding that the penalty imposition of Rs. 7,60,000 was valid under Rule 96ZQ(5)(ii) of the Central Excise Rules, 1944.In summary, the Tribunal upheld the penalty imposed on the appellant under Rule 96ZQ(5)(ii) of the Central Excise Rules, emphasizing the mandatory nature of the penalty provision when duty liability under the Compounded Levy Scheme is not discharged by the due date. The decision was based on legal precedents and recent Supreme Court judgments, affirming the validity of the penalty amount determined by the Commissioner.