2004 (8) TMI 245 - AT - Central Excise

Tribunal reduces penalty based on discretion under Rule 96ZQ, rejecting Revenue's appeal.

The tribunal rejected the Revenue's appeals against the reduction of penalty imposed on the respondent from Rs. 32 lakhs to Rs. 16 lakhs. It held that ... Penalty - Quantum of Issues:1. Reduction of penalty imposed on the respondent.2. Interpretation of Rule 96ZQ of the Central Excise Rules regarding penalty imposition.3. Comparison of penalties imposed in different cases by various courts.Issue 1: Reduction of penalty imposed on the respondentThe Revenue filed appeals against an Order-in-Appeal reducing the penalty imposed on the respondent from Rs. 32 lakhs to Rs. 16 lakhs. Despite the absence of the respondents during the hearing, the tribunal proceeded to hear the case. The Revenue argued that the penalty imposed was proper under Rule 96ZQ of the Central Excise Rules, emphasizing that no discretion was provided for imposing a penalty less than the duty involved. The Revenue relied on the decision of the Allahabad High Court in Pee Aar Steels (P) Ltd. v. CCE, Meerut, stating that the penalty mentioned in the Rule was the only penalty to be levied in case of failure to pay duty by the specified date.Issue 2: Interpretation of Rule 96ZQ of the Central Excise Rules regarding penalty impositionThe tribunal considered the submissions and provisions of Rule 96ZQ, which state that an independent processor failing to pay duty by the specified date shall be liable to a penalty equal to the outstanding duty or Rs. 5000, whichever is greater. The tribunal noted the Revenue's argument that the penalty should be equal to the outstanding duty. However, the Commissioner (Appeals) referred to a Supreme Court decision in the case of State of Madhya Pradesh v. Bharat Heavy Electricals Ltd., where it was held that the penalty mentioned was the maximum amount that could be levied, and the authority had the discretion to levy a lesser amount based on the circumstances of each case. The tribunal applied this interpretation and rejected the appeals, concluding that Rule 96ZQ only sets the maximum penalty that can be imposed for failure to pay duty by the specified date.Issue 3: Comparison of penalties imposed in different cases by various courtsThe tribunal compared the penalties imposed in different cases by various courts, highlighting the interpretation of penalty provisions. It noted the decision of the Allahabad High Court and the Supreme Court, emphasizing that the penalty mentioned in the rules was not necessarily the only amount that could be levied, and the authority had discretion based on the circumstances of each case. By following the Supreme Court's decision, the tribunal rejected the appeals, stating that Rule 96ZQ sets the maximum penalty that can be imposed for non-payment of duty by the specified date.