2008 (7) TMI 339 - AT - Central Excise

Tribunal Upholds Penalty Reduction for Manufacturer of M.S. Ingots Under Rule 96ZO

The Tribunal rejected the Department's appeal and affirmed the Commissioner's decision to reduce the penalty imposed on the respondent, a manufacturer of ... Reduction of penalty - compounded levy scheme – appellant paid duty as per actual production as manufacturers have been disputing the manner of determination of duty liability - matter got finally disposed of by SC in subsequent years – subsequently, short levied duty was reportedly paid along with interest at applicable rates (which are higher than the prevailing market interest) - no mens rea on part of assessee - held that penalty prescribed u/r 96ZO has to be considered as maximum and discretionary - reduction of penalty is justified Issues:Reduction of penalty by CommissionerInterpretation of Rule 96ZODiscrepancy in duty paymentAnalysis:The case involved an appeal by the Department against the Commissioner's decision to reduce the penalty imposed on the respondent. The respondent, a manufacturer of M.S. Ingots, was availing the compounded levy scheme under Rule 96ZO(3) of the Central Excise Rules. The dispute arose regarding the duty liability for the year 1998-99, where the respondent claimed to have paid duty based on actual production, while the Department contended that duty had to be paid as per Rule 96ZO(3) following certain Supreme Court decisions.The original authority confirmed a differential duty and imposed a significant penalty, which was later reduced by the Commissioner on appeal. The Department argued that the reduction of penalty was contrary to the law, citing a decision by the High Court of Allahabad. In contrast, the respondent relied on a decision by the High Court of Punjab and Haryana, emphasizing that the penalty under Rule 96ZO should be seen as a maximum and discretionary.Upon considering the submissions, the Tribunal noted that the case did not involve clandestine removal or total non-payment of duty. It was highlighted that the duty was paid as per actual production, and the remaining amount was in dispute due to industry-wide issues during the initial implementation of the new levy mode. The Tribunal acknowledged that the law was clarified by the Supreme Court in subsequent years, and the short-levied duty was paid with interest. It was concluded that no mens rea could be attributed in the circumstances of the case, and the penalty reduction by the Commissioner was deemed justified based on the High Court's decision regarding the discretionary nature of penalties under Rule 96ZO.Ultimately, the Tribunal rejected the Department's appeal, affirming the Commissioner's decision to reduce the penalty. The operative portion of the order was pronounced in the open court, bringing the case to a close.