2000 (8) TMI 451 - AT - Central Excise

Tribunal interprets Rule 96ZI of Central Excise Rules in duty calculation case

The Tribunal interpreted Rule 96ZI of the Central Excise Rules, 1944 in a case involving duty calculation for machine-made embroidery. M/s. Perfect ... Penalty Issues:1. Interpretation of Rule 96ZI of the Central Excise Rules, 1944 regarding duty calculation for machine-made embroidery.2. Imposition of penalty for duty shortfall and procedural fairness in penalty imposition.3. Application of various penalty rules including Rule 209 and Rule 96ZL.4. Justification for reducing penalties based on precedent and individual roles in the case.Issue 1:The case involved the interpretation of Rule 96ZI of the Central Excise Rules, 1944 concerning the calculation of duty for machine-made embroidery. The appellant, M/s. Perfect Embroidery, was found to have underpaid duty due to incorrectly accounting for the number of shifts in their production process. The duty was calculated based on two shifts instead of the actual three shifts they were operating in, leading to a shortfall in revenue. The visiting officers discovered this discrepancy, and a show cause notice was issued demanding the unpaid duty.Issue 2:Regarding the imposition of penalties, the Deputy Commissioner confirmed the demand for the duty shortfall and imposed penalties on the appellant firm and individuals involved. The appellants contested the penalties, arguing that they had rectified the duty shortfall before the notice and that penalties should not be levied based on previous Tribunal judgments and the prescribed penalty amounts in the rules. The appellants also raised concerns about procedural fairness, claiming that they did not receive the memorandum to appear before the Commissioner, leading to an ex parte order.Issue 3:The discussion also focused on the application of penalty rules, including Rule 209, Rule 96ZL, and Rule 210. The Deputy Commissioner imposed penalties under these rules, citing the need for penalty equal to three times the value of the excisable goods under Rule 209. The appellants argued against the penalty amounts and the invocation of Rule 209A, contending that the penalties should be set aside based on the specific rules and their compliance.Issue 4:In considering the reduction of penalties, the Tribunal referred to precedent, including the Larger Bench Judgment in DCW Ltd. v. Collector of Central Excise, which highlighted the payment of duty upon department notification as a factor for penalty reduction. However, the Tribunal found that the appellants were aware of the duty calculation error but did not rectify it until after the department's notice. The penalties imposed on the individuals were reviewed, with the Tribunal concluding that there was no evidence of direct involvement or awareness of unlawful activity for one individual and setting aside the penalties for both individuals. The penalty imposed on the appellant firm was reduced from Rs. 1,20,298.40 to Rs. 60,000, with the appeals of the appellants rejected except for the modifications in penalty amounts.