2015 (5) TMI 625 - HC - Central Excise

High Court overturns penalties for excise duty credits on texturing machine, citing retrospective rule

M/s. Jitendra Synthetics Versus Commissioner of Central Excise & Customs

The High Court set aside penalties imposed by the Appellate Tribunal on an appellant for claiming excise duty credits on a texturing machine. The court ... Imposition of penalty - Whether the Appellate Tribunal was right in imposing penalty on the appeal under Rule 57U[6] in the facts of this case - Held that:- If the provision for imposing penalty was not in existence in December, 1994 when the contravention took place, then, there was no question of imposition of any penalty on the basis of the subsequent rule which was not in existence at the relevant time. The Apex Court in Commissioner of Central Excise, Mumbai-I v. Lal Mining Engg.Works, reported in [2007 (7) TMI 306 - SUPREME COURT OF INDIA] has held in para-3 that the penalty cannot be invoked in a case which was before the Apex Court as the same would amount to giving retrospective operation thereto which is impermissible in law. - Decided in favour of assessee. Issues:- Imposition of penalty under Rule 57U[6] by the Appellate Tribunal- Denial of modvat credit on capital goods- Appeal against penalty imposition by the Appellate Tribunal without hearing the appellantImposition of penalty under Rule 57U[6] by the Appellate Tribunal:The appellant, engaged in manufacturing excisable goods, took credit for excise duties paid on a texturing machine. However, a show cause notice was issued proposing to deny the credit, alleging non-compliance with Rule 57R[3]. The Joint Commissioner of Central Excise denied the credit and imposed a penalty under Rule 57U[6]. The Commissioner [Appeals] upheld the duty demand but set aside the penalty, citing the retrospective application of the penal provision added in July 1996 to a transaction from 1994-95. The Appellate Tribunal later imposed a penalty of &8377; 45,250, which the appellant contested, arguing that the penalty provision did not exist at the time of the contravention. The High Court agreed, citing a Supreme Court ruling against retrospective penalty imposition and set aside the penalty.Denial of modvat credit on capital goods:The appellant purchased a texturing machine, paying excise duties, and claimed credit under Rule 57Q of the Central Excise Rules. However, a show cause notice was issued challenging the credit due to alleged non-compliance with Rule 57R[3]. Despite the appellant's reply, the Joint Commissioner denied the credit, leading to a series of appeals and orders. The Commissioner [Appeals] upheld the duty demand but set aside the penalty due to the retrospective nature of the penal provision. The Appellate Tribunal later imposed a penalty, which was eventually set aside by the High Court based on the non-existence of the penalty provision at the time of the transaction.Appeal against penalty imposition by the Appellate Tribunal without hearing the appellant:The Appellate Tribunal imposed a penalty on the appellant without the appellant being present for the hearing, as claimed by the appellant's counsel. The appellant challenged the penalty, arguing that the provision for penalty imposition did not exist at the time of the contravention. The High Court agreed with the appellant's argument, citing a Supreme Court ruling against retrospective penalty imposition and set aside the penalty. The appeal was allowed in favor of the appellant, highlighting the importance of procedural fairness in penalty imposition.