Retrospective penalty provisions and new penalty grounds cannot be raised in reference proceedings

Section 11AC penalty under the Central Excise Act could not be applied retrospectively to past conduct, so the penalty order for the relevant period was unsustainable. The Revenue also could not invoke Rule 173Q of the Central Excise Rules at the reference stage because that basis had not been raised before the Tribunal and was outside the framed question of law. On that footing, no referable question of law arose for consideration and the Revenue's petition failed.

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Issues: Whether any referable question of law arose concerning the imposition of penalty under Section 11AC of the Central Excise Act, 1944 and whether the Revenue could invoke Rule 173Q of the Central Excise Rules, 1944 at this stage.

Analysis: The penalty provision under Section 11AC was introduced with effect from 28 September 1996 and was held not to operate retrospectively. On that basis, the authorities below were right in holding the penalty order unsustainable for the period in question. The attempt to rely on Rule 173Q was not available, as no such contention had been raised before the Tribunal and the framed question did not encompass that rule.

Conclusion: No referable question of law arose for consideration, and the Revenue's petition failed.

Ratio Decidendi: A penalty provision that is not retrospective cannot be applied to past conduct, and a fresh statutory basis for penalty cannot be invoked for the first time in proceedings for reference when it was neither pleaded nor included in the question referred.

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