2013 (9) TMI 903 - HC - Central Excise

Central Excise Department appeals penalty reduction; Tribunal upholds reduced penalty, citing non-deliberate error.

The Central Excise Department appealed against the reduction of penalty by the Appellate Authority and Tribunal, seeking to uphold the original penalty ... Penalty u/s 11AC – abatement claimed u/s 3A towards non production under compounded levy scheme - Held that:- If a manufacturer does not produce non-alloyed hot re-rolled steel during any continuous period of not less than seven days and wishes to claim abatement under Section 3A of the Act, he has to give intimation under Rule 96ZP(2) about closure of the units - either prior to the date of closure, or on the date of closure - If the manufacturer starts production again, he is required to give intimation about the same - either prior to the date of starting production or on the date of starting production. In the present it is not denied, nor there was any material to show that the factory continued production after October, 1997 - Even if the intimation was given subsequently, unless there was some material to show that the factory had run for a period beyond those two months the penalty could not be levied. In Union of India v. Rajasthan Spinning & Weaving Mills [2009 (5) TMI 15 - SUPREME COURT OF INDIA ] and State of Madhya Pradesh v. Bharat Heavy Electricals [1997 (8) TMI 252 - SUPREME COURT OF INDIA ] - Penalty under Section 11AC of the Act can be imposed only when conditions mentioned in Section 11AC exist - The authorities do not have discretion in fixing the penalty, and that where the penalty is impermissible, it cannot be levied equal to the duty under Section 11AC of the Act - since the Tribunal recorded the findings that the penalty itself was not leviable - The Tribunal, therefore, erred in reducing the amount of penalty. Issues:1. Appeal against the reduction of penalty by the Appellate Authority and Tribunal.2. Substantial questions of law regarding abatement of duty and imposition of penalty.3. Jurisdiction of the Tribunal to reduce penalties under Section 11AC of the Central Excise Act.4. Duty liability determination under Section 3A of the Central Excise Act.5. Intimation requirements for claiming abatement under Rule 96ZP(2).6. Applicability of penalty under Section 11AC of the Act.Analysis:1. The appellant, the Central Excise Department, appealed against the reduction of penalty by the Appellate Authority and Tribunal. The penalty was reduced from Rs. 2,14,502/- to Rs. 10,000/- due to non-payment of differential duty, which was deemed non-deliberate as the assessee had permanently closed their mill and informed the Revenue accordingly.2. The appeal raised substantial questions of law regarding the abatement of duty during the closure period and the imposition of penalties under Rule 96ZP of the Central Excise Rules, 1944. The Tribunal's decision to reduce the penalty was challenged based on a previous judgment that stated the Tribunal lacked the jurisdiction to lower penalties specified under Section 11AC of the Central Excise Act.3. The appellant relied on a previous judgment to argue against the Tribunal's authority to reduce penalties, emphasizing that the circumstances of the present case differed from the precedent cited. The duty liability was determined under Section 3A of the Central Excise Act based on the annual production capacity, with the appellant paying only a portion of the total duty owed.4. The Appellate Authority and Tribunal considered the closure of the assessee's unit and the duty liability for the operational months, resulting in a reduced penalty amount. The Tribunal found that the non-payment of differential duty was due to the permanent closure of the unit and not deliberate evasion.5. The intimation requirements for claiming abatement under Rule 96ZP(2) were discussed, emphasizing the necessity for manufacturers to inform authorities about unit closures and production restarts. In this case, the penalty was deemed unjustified as there was no evidence of production beyond the closure period.6. Precedents were cited to establish that penalties under Section 11AC of the Act can only be imposed under specific conditions. The Tribunal's decision to reduce the penalty was deemed erroneous as it was found that the penalty itself was not applicable in this case. As the assessee did not appeal, no relief was granted, and the appeal was ultimately dismissed.