2009 (5) TMI 278 - AT - Central Excise

Court rejects abatement claim, upholds duty demand, reduces penalty post-amendment.

The court rejected the appellants' abatement claim for closure periods due to procedural lapses, emphasizing strict adherence to Rule 96ZO(2) ... Compounded levy scheme – Production capacity based duty - Letters on closure of furnace furnished belatedly - the exact time of closure of factory and the timing at which the closure comes to an end not indicated in letters - It is to be noted that requirement of intimation regarding the date and timing of the closure and recommencement of production is not an empty formality - The requirement of timing and date along with closing and opening balance of stock would reveal that sufficient material is required to be placed at the disposal of the Revenue authorities in order to enable them to verify whether any clandestine production is in progress which may result in clandestine removal of the products by evading the duty thereon. - The exact time regarding the commencement and closure and corresponding information regarding the availability of stock required for the utilisation of the manufacture of the product – held that abatement is not admissible - mere failure on the part of the appellant to clear the dues by 30-4-98 in terms of such proviso could not warrant levy of penalty as the said amendment had come into force on 1-5-98 and whatever dues remained after 1-5-98, those could be subject to levy of penalty. In this view of the matter, the penalty imposed in relation to the amount of duty demanded for the period starting from 2-9-97 to 6-4-98 amounting to Rs. 13,33,334/-, the same could not be imposed. The penalty would be leviable only in relation to the amount of duty for the period from 14-7-98 to 29th July, 99 – Further, It is pertinent to note that the issue regarding limitation in terms of Section 11A of the said Act was neither raised before the lower authorities nor even in the memorandum of appeal filed in this Tribunal. In fact, the point was sought to be raised for the first time in the course of arguments. The point of limitation is not a pure question of law. It is essentially mixed question of law and facts - Considering the two decisions of the Apex Courts, the Larger Bench of this Tribunal in Mohinder Steels case, has clearly ruled that the time limit prescribed under Section 11A would not be attracted in relation to Compounded Levy Scheme under Rule 96ZO. – Further, in tax matters, if the condition is essentially to enable the authority to have check over clandestine production and clandestine removal of the goods, than by no stretch of imagination such a condition can be said to be non-mandatory. Issues Involved:1. Abatement claim for closure periods.2. Demand of duty and limitation under Section 11A.3. Duty liability post alleged dispossession.4. Imposition of penalty.Issue-wise Detailed Analysis:1. Abatement Claim for Closure Periods:The appellants claimed abatement for periods when their furnace was closed, citing intimation letters. The Revenue authorities disallowed the claim due to procedural lapses. The appellants argued that substantial compliance should suffice, supported by electricity disconnection evidence. However, the court emphasized strict adherence to Rule 96ZO(2) requirements, including timely and detailed intimation of closure and reopening, which the appellants failed to meet consistently. The court ruled that such procedural requirements are mandatory to prevent duty evasion and clandestine production, thus rejecting the abatement claim.2. Demand of Duty and Limitation under Section 11A:The appellants contested the duty demand for the period from September 1997 to July 1999, arguing it was time-barred under Section 11A. The court noted that this issue was not raised before lower authorities or in the appeal memorandum. Citing the Tribunal's decision in Mohinder Steels Ltd., the court held that Rule 96ZO proceedings are independent of Section 11A's time limits. Consequently, the demand was not barred by limitation, and the appellants' contention was dismissed.3. Duty Liability Post Alleged Dispossession:The appellants claimed no duty liability after 21-3-98 due to dispossession from the premises. The court examined a letter dated 21-3-98, which only mentioned closure, not dispossession. The court found no evidence supporting dispossession and noted that the appellants failed to appear before the authority to explain. The court also observed that electricity disconnection from 7-4-98 to 14-7-99 was verified by the authorities, who excluded this period from duty liability. Thus, the appellants' claim of dispossession was rejected.4. Imposition of Penalty:The appellants argued against the penalty, citing intermittent production stoppages and pending abatement claims. The court referenced the Apex Court's decision in Dharamendra Textile Processors, stating no discretion in penalty imposition under Rule 96ZO. However, the court acknowledged that the penalty provision was amended effective 1-5-98. Since the appellants were not aware of the amendment before its enforcement, the court ruled that the penalty could only apply to dues post-1-5-98. Consequently, the penalty was reduced from Rs. 15,91,398/- to Rs. 2,58,064/- for the period from 14-7-98 to 29-7-99.Conclusion:The appeals were partly allowed. The abatement claim rejection and duty demand were upheld. The penalty was reduced to Rs. 2,58,064/-, reflecting the period post-amendment of Rule 96ZO. The rest of the impugned order remained unchanged.