2000 (9) TMI 105 - AT - Central Excise

Tribunal overturns excessive penalty for diverting NGL, rules time bar limitations not applicable.

NATIONAL FERTILIZER LTD. Versus COMMISSIONER OF CENTRAL EXCISE, INDORE

NATIONAL FERTILIZER LTD. Versus COMMISSIONER OF CENTRAL EXCISE, INDORE - 2000 (122) E.L.T. 41 (Tribunal) Issues:1. Contravention of rule 192 and 196 of Central Excise Rules, 1944 regarding diversion of NGL for generation of electric power.2. Imposition of duty, penalty, and forfeiture of B-8 bond.3. Applicability of extended period provisions.4. Imposition of penalty under rule 173Q read with Section 11AC.5. Time bar limitations and applicability of proviso clause of Section 11A(1).6. Penalty imposition for contravention of rule 192 under rule 173Q.7. Common penalty under Section 11AC and 173Q.8. Decision on duty demand and penalty.1. Contravention of Rules 192 and 196:The appellants were noticed for diverting NGL received under concessional rate for manufacturing fertilizer to generate electric power. The Commissioner found that part of the NGL was used for power generation, leading to a duty demand of Rs. 1,10,86,954 on the quantity used for electricity generation. The penalty of Rs. 2 crores was imposed under Rule 173Q, and interest was ordered. The Tribunal limited its findings to the penalty imposition.2. Imposition of Duty, Penalty, and Bond Forfeiture:The Commissioner confirmed duty on NGL used for electricity generation and dropped the demand for NGL used for fertilizer production. A penalty of Rs. 2 crores was imposed under Rule 173Q, and interest was ordered. The Tribunal set aside the penalty of Rs. 2 crores under Rule 173Q read with Section 11AC.3. Applicability of Extended Period Provisions:The Tribunal noted that the Commissioner justified the application of the extended period but failed to provide reasons for imposing a penalty under Rule 173Q. The imposition of penalty without proper reasoning was deemed bad in law and required to be set aside.4. Imposition of Penalty under Rule 173Q:The Tribunal found that penalty under Rule 173Q for contravention of Rule 192 was not applicable as Rule 196 already provided for forfeiture of bond and confiscation of goods. Therefore, the penalty imposed under Rule 173Q was set aside.5. Time Bar Limitations and Proviso Clause of Section 11A(1):The Tribunal held that the plea of time bar raised under the proviso to Section 11A was not applicable as duty on unaccounted goods under Rule 196 was not covered by the relevant date. The finding of the applicability of the proviso clause of Section 11A(1) was deemed redundant.6. Penalty Imposition for Contravention of Rule 192:The Tribunal noted that a common penalty under Section 11AC and 173Q in excess of what was prescribed under Section 11AC needed to be set aside. The penalty under Rule 173Q for violation of Rule 192 was not applicable as the appellants were not the manufacturers of the goods received under Chapter X.7. Common Penalty under Section 11AC and 173Q:The Tribunal set aside the common penalty under Section 11AC and 173Q as it exceeded the prescribed amount under Section 11AC.8. Decision on Duty Demand and Penalty:The Tribunal refrained from deciding on the duty demand and penalty, as the appeal was permitted to be pursued regarding penalty only. The penalty under Rule 173Q read with 11AC of Rs. 2 crores was set aside, and the appeal in this aspect was allowed.