2015 (12) TMI 736

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....er under the compounded levy scheme the provisions of erstwhile Rule 96ZO permitting imposition of penalty equal to the amount of duty for delay in payment of duty, without any discretion and without having regard to extent and circumstances of delay, could be held to be ultra vires of the Act and the Constitution of India? ii) Whether mandatory penalty equal to amount of duty on the assessee in case of violation of the provisions of erstwhile Rule 96ZO of the Central Excise Rules, 1944 could be waived or reduced in the discretion of the adjudicating authority having regard to extent and circumstances of delay in payment of duty? 2. A few facts necessary for adjudication of the present appeal as narrated therein may be noticed. The ass....

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....ppeal was dismissed in default. Against the order dated 22.1.2004, the assessee filed an appeal before this Court and this Court vide order dated 1.11.2004 remanded the matter back to the Commissioner (Appeals). Thereafter, the Commissioner (Appeals) vide order dated 30.3.2006 reduced the penalty to Rs. 25,00,000/-. Still dissatisfied, the assessee filed an appeal before the Tribunal against the imposition of penalty of Rs. 25,00,000/-. The Tribunal vide order dated 25.8.2006 further reduced the penalty to Rs. 25,000/-. Against the order dated 25.8.2006 the revenue filed an appeal before this Court which is pending adjudication. The revenue also filed an appeal before the Tribunal against the order dated 30.3.2006 passed by the Commissioner....

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.... being arbitrary and were accordingly declared to be ultra vires the Act and the Constitution. It was recorded as under:- 15. Applying the above principles to the present situation, the provision for minimum mandatory penalty equal to the amount of duty even for slightest bonafide delay without any element of discretion is beyond the purpose of legislation. The object of the rule is to safeguard the revenue against loss, if any. The penalty has been provided in addition to interest. Mere fact that without mens rea, an can be punished or a penalty could be imposed is not a blanket power without providing for any justification. In the Indian Constitutional scheme, power of legislature is circumscribed by fundamental rights. Judicial review ....

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....missioner of Central Excise and another) and other connected cases while delving into similar issue had upheld the view of this Court in Bansal Alloys & Metals Pvt. Ltd's case (supra) and struck down Rules 96ZO, 96ZP and 96ZQ. The Apex Court had observed as under:- "38. Under Section 37(3), the statute itself provides in all cases where no other penalty is provided by the Act that a penalty not exceeding Rs. 5,000/- alone can be levied. Sub-Section(4) is even more telling. Even in cases where there is a clandestine removal of excisable goods, and cases where the assessee intends to evade payment of duty, the assessee is liable to a penalty not exceeding the duty leviable on such goods or Rs. 10,000/- whichever is greater. It will be n....