AI Drafter 
TaxTMI 
TaxTMI 
2015 (9) TMI 464
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.... Commissioner of Customs and Excise and Vs. Kannapiran Steel Re-Rolling Mills 2011 (263) E.L.T. 22 (S.C.) and Commissioner of Central Excise, Mumbai 2011 (267) E.L.T. 438 (S.C.) In the light of the above judgments he submits that the penalty under Rule 96ZP (3) of the erstwhile Central Excise Rules, 1994 (hereinafter referred to as 'the Rules') is mandatory and, therefore, the Tribunal should not have imposed penalty equal to the amount of duty. He further submits that even though Rule 96ZP (3) was omitted in the year 2001 but since the show cause notice was issued to the respondent prior to the date of omission and, as such, the proceedings shall not lapse in view of provisions of Section 38A of the Central Excise Act, 1944 (hereinafter referred to as 'the Act'). 4. Learned counsel for the respondent submits as under: (i) Rule 96ZP (3) was omitted by notification No. 6 of 2001 and CE (N.P.) dated 11.5.2001 without any saving clause and, therefore, the appellants could not have passed the order in original dated 13.11.2003. He submits that the provisions itself was not available as on the date on which the order was passed by the adjudicating authority. ....
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....y while the respondent assessee filed the appeal to strike down the penalty. The appeal of the present appellant was rejected and the appeal of the respondent assessee was partly allowed and the penalty was reduced to 1,50,000/- by the Commissioner (Appeals) vide order dated 22nd June, 2004. Aggrieved with the said appellate order the present appellant as well as the respondent assessee preferred appeals before the Customs, Excise and Service Tax Appellate Tribunal, New Delhi who dismissed the appeal of the respondent-assessee and partly allowed the appeal of the present appellants by enhancing the penalty to Rs. 3 lacs. Aggrieved with the aforesaid order of the Tribunal, the present appeal has been filed by the appellant. 7. The provisions of Rule 96ZP (3) was enacted by the Central Government in exercise of powers conferred under Section 37 (3)/(4) of the Act. For the sake of convenience and reference, the provisions of Section 37 (3)/(4) of the Act and the erstwhile Rule 96ZP(3) of the Rules as amended by the Finance Act 2000, are reproduced below: "Section 37 (3)- In making rules under this section, the Central Government may provide that any person committing a bre....
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.... Provided further that for the month of September, 1997, the manufacturer may pay the amount due for the said month by the 30th of September, 1997: Provided also that if a manufacturer makes a change in the capacity of re-rolling installed in his factory, or there is any change in the total re-rolling capacity installed, he shall pay the amount, calculated pro rata: [Provided also that where a manufacturer fails to pay the whole of the amount of duty payable for any month by the 10th day of such month, he shall be liable to pay,- (i) the outstanding amount of duty along with interest thereon at the rate of eighteen per cent. per annum calculated for the period from the 11th day of such month till the date of actual payment of the outstanding amount; and (ii) a penalty equal to the amount of duty outstanding from him at the end of such month or five thousand rupees, whichever is greater: Provided further that if the manufacturer fails to pay the total amount of the duty payable for each of the months from September, 1997 to March, 1998 by the 30th day of April, 1998, he shall also be liable to pay a penalty equal to the outstanding....
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....nt under Sub Section (4) of Section 37 of the Act which provides the minimum and maximum penalty subject to the condition that there should be an intention to evade payment of duty. Thus, penalty under Rule 96ZP(3) may be levied on assessee only if he intended to evade payment of duty. In other words, in the absence of intention to evade payment of duty, penalty is not leviable under Rule 96ZP(3). 10. From perusal of the show cause notices we find that there is no allegation of intention to evade payment of duty by the respondent. The only allegation is of late payment of central excise duty. In the order in original the adjudicating authority recorded a finding of fact that the interest on late payment of duty has already been deposited by the respondent-assessee along with duty much before issuance of the show cause notice. 11. Before the adjudicating authority the respondent-assessee, amongst other contentions, also contended that penalty cannot be imposed as there was no malafide on his part. He also relied upon the judgment of Hon'ble Supreme Court in the case of Hindustan Steel Ltd Vs. State of Orisa 1978 ALD 159 wherein it was held that an order imposing penalty fo....
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....at there was no intention to evade the payment of central excise duty on the part of the respondent-assessee. No material has been placed on record by the appellant to establish that the stand taken by the respondent-assessee regarding the financial constraints or no intention to evade payment of duty are incorrect. Thus, on the facts of the case, penalty was not leviable on the respondent-assessee under Rule 96ZP(3) of the Rules. 16. In the case of Bansal Alloys & Metals Pvt. Ltd. Vs. Union of India, 2010 (260) ELT 343 (P & H) (Paras 15, 16 & 17), the High Court held the penalty provision of Rule 96ZO, ZP and ZQ to be ultra vires the Act and the Constitution. 17. In the case of Commissioner of Commissioner of Customs and Central Excise, Hyderabad v. Sunder Ispat 2015 (316) ELT 238 (AP), the Andhra Pradesh High Court held that penalty under Rule 96 ZO (3) is not leviable in view of the fact that penalty provision of Rule 96ZO, ZP and ZQ of the rules were declared ultra-vires by Punjab and Haryana High Court in the case of Bansal Alloys & Metals Pvt. Ltd. v. Union of India 2010 (260) ELT 343 (Punjab & Haryana ) and similar declarations were made by the High Court of Uttarakhan....
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....on, has some significance to help us to decipher the intention sought to be achieved by the insertion. Rule 10 which laid down the procedure for refund of duty erroneously refunded was omitted without any saving clause. Some High Courts, including our, held that proceedings stood lapsed, while the Mandya Pradesh High Court held that the proceedings would not lapse and could continue under Section 11A. The authoritative pronouncement in Kolhapur Sugarcane case ((supra)) approved the Allahabad view and held that neither the proceedings were saved by the General Clauses Act nor by any other provision in the Act. This reflected directly on the revenue of the State and under these circumstances Section 38A was introduced to cure the defect of the deletion and provide the remedy by enacting the section which, to an extent, is in pari materia with Section 6 of the General Clauses Act. In a way, the deficiency found in notification omitting Rule 10 and Act 25 of 1978 introducing Section 11A are sought to be remedied. The intention of the legislature is crystal clear that proceedings initiated under Rule 10 would not lapse but could be taken to its logical conclusion for which Section 38A h....