Tribunal upholds penalty reduction in tax dispute, rejects Revenue's appeal citing High Court ruling

The Tribunal upheld the reduction of penalty from Rs. 99,46,000 to Rs. 5,000 imposed by the Commissioner (Appeals) in a dispute concerning penalty imposition under Rule 96ZQ(5). The Tribunal rejected the Revenue's appeal to enhance the penalty equivalent to the late deposited duty amount, citing the High Court's ruling on the constitutionality of the relevant provisions. The Tribunal clarified that a previous Supreme Court decision was not applicable to the present case. Consequently, the Tribunal found no merit in the Revenue's appeal and affirmed the penalty reduction to Rs. 5,000.

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Issues:
Reduction of penalty imposed by Commissioner (Appeals) from Rs. 99,46,000 to Rs. 5000.
Dispute regarding penalty imposition under Rule 96ZQ(5) - equivalent to late deposited duty or fixed penalty of Rs. 5,000.
Validity of Rule 96ZQ(5) and related provisions challenged in various High Courts.
Applicability of Supreme Court decision in Commissioner of Central Excise, Mumbai v. Sunil Silk Mills to the present case.

Analysis:
The appeal was filed by the respondents against the reduction of penalty from Rs. 99,46,000 to Rs. 5000 by the Commissioner (Appeals). The dispute revolved around the penalty imposition under Rule 96ZQ(5), whether it should be equivalent to the late deposited duty or a fixed penalty of Rs. 5,000. The Revenue contended for a penalty equivalent to 100% of the late deposited duty, citing the maximum penalty provision of the Rule.

The Tribunal noted that Rule 96ZQ and its sub-sections were under challenge in various High Courts regarding their constitutionality. Specifically referencing the judgment in Bansal Alloys and Metals v. Union of India, the High Court of Punjab and Haryana held that the provisions of Rules 96ZO, 96ZP, and 96ZQ, which provide for minimum penalty without discretion, are ultra vires the Constitution of India.

Given the absence of contrary decisions and the High Court's ruling on the vires of Rule 96ZQ(5), the Tribunal found no merit in the Revenue's appeal to enhance the penalty equivalent to the duty amount. The Tribunal also addressed the Revenue's argument citing the Supreme Court decision in Commissioner of Central Excise, Mumbai v. Sunil Silk Mills. However, the Tribunal clarified that the vires of the provisions were not the subject of dispute before the Supreme Court in that case, and the question was neither raised nor considered. Therefore, the Tribunal rejected the Revenue's plea for penalty enhancement based on the Supreme Court decision, emphasizing the High Court's ruling on the provisions' constitutionality.

In conclusion, the Tribunal found no justification for the Revenue's appeal and accordingly rejected it, upholding the penalty reduction to Rs. 5000 as decided by the Commissioner (Appeals). The judgment was pronounced in open court on 30-3-2012.

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