2014 (12) TMI 156 - AT - Central Excise

Tribunal rules against Revenue on excise duty liability, citing omission impact on pending proceedings

The Tribunal dismissed the Revenue's appeal, ruling that the respondent did not fall under the definition of 'independent processors' for excise duty ... Compounded Levy Scheme - Notification No. 36/98-C.E., dated 10-12-1998 - discharge of duty liability under Rule 96ZQ read with Notification No. 41/98-C.E., dated 10-12-98 - Held that:- All proceedings which were pending as on 11-5-2001, even if initiated prior to omission of Rule 96ZQ would thereafter automatically lapse and no order could be passed if they were not concluded at the time of omission of Section 3A w.e.f. 11-5-2001. In this judgment, the Hon’ble High Court has also considered the judgment of Punjab & Haryana High Court in the case of Shree Bhagwati Steel Rolling Mills v. CCE, Chandigarh reported in [2006 (10) TMI 17 - HIGH COURT OF PUNJAB & HARYANA (CHANDIGARH)] and expressed its disagreement. In view of the above judgment of the Hon’ble Gujarat High Court, which is based on the judgment of the Apex Court in the case of Rayala Corporation Ltd. (1969 (7) TMI 109 - SUPREME COURT OF INDIA) and Kolhapur Cane Sugar Works Ltd. (2000 (2) TMI 823 - Supreme Court of India), after omission of Rule 96ZQ w.e.f. 1-3-2001 and omission of Section 3A of the Act without saving clause w.e.f. 11-5-2007, the proceedings initiated prior to omission which had not been concluded as on 11-5-2001 would lapse. In this case, though, initially the show cause notice issued prior to 1-3-2001 had been adjudicated by the Asstt. Commissioner, the Commissioner (Appeals) had set aside the orders and had remanded the matter for part of the period of dispute to the Asstt. Commissioner for de novo adjudication and de novo proceedings were concluded in 2004, long after omission of Rule 96ZQ w.e.f. 1-3-2001 and Section 3A w.e f. 11-5-2001 without any serving clause and therefore the same would lapse. - Decided against Revenue. Issues:Interpretation of the term 'independent processors' under Notification No. 36/98-C.E., dated 10-12-98 for excise duty liability. Effect of omission of Rule 96ZQ and Section 3A of the Central Excise Act, 1944 on pending proceedings and duty demands.Analysis:The case involved a dispute regarding the classification of the respondent as 'independent processors' for excise duty liability under Notification No. 36/98-C.E., dated 10-12-98. The respondent argued that they were not independent processors as they had a proprietary interest in another unit engaged in weaving fabrics. The Commissioner (Appeals) set aside the duty demand based on this argument. The Revenue appealed, contending that the respondent fell under the definition of 'independent processors' due to the negligible production of the other unit. The Revenue relied on a judgment of the Punjab & Haryana High Court to support their position.The respondent's counsel argued that due to the omission of Rule 96ZQ and Section 3A of the Central Excise Act, 1944, no proceedings for recovery of duty or penalty could be initiated for the period prior to the omissions. They cited a judgment of the Gujarat High Court to support their stance. The respondent highlighted that the de novo adjudication confirming duty demand was completed after the omissions without any saving clause, indicating that the proceedings should not survive.The Tribunal examined the issue in light of the judgments cited. Referring to the Gujarat High Court's decision in Krishna Processors v. Union of India, the Tribunal concluded that proceedings initiated under the omitted Rule 96ZQ could not continue after the omission of Section 3A without a saving clause. The Tribunal held that all pending proceedings as of the omission date would lapse, even if initiated before the omissions. As the de novo adjudication in this case was completed after the omissions without a saving clause, the Tribunal dismissed the Revenue's appeal, stating that the duty demand could not be sustained.In conclusion, the Tribunal's decision focused on the interpretation of the term 'independent processors' for excise duty liability and the impact of the omission of Rule 96ZQ and Section 3A on pending proceedings. The judgment emphasized the legal implications of the omissions without saving clauses and their effect on duty demands and penalty proceedings initiated prior to the omissions.