TaxTMI 
TaxTMI 
2016 (4) TMI 840
X X X X Extracts X X X X
X X X X Extracts X X X X
....and Regulation) Act, 1951, the Penalty imposed vide Order-in-Original dated 30/31st October, 2001 under Section 173(Q) of the Central Excise Rules, 1944 is not leviable for the periods for which the penalty is imposed, i.e. from December, 1998 to December, 2001. Factual Matrix of the case 2. The respondent is a manufacturer of Tractor. Under the Automobile Cess Rules, 1984 enacted under Section 30 of Industries (Development and Regulation) Act, 1951, the respondent was liable to make the payment of Automobile Cess. 3. As the aforesaid Automobile Cess was not paid for different periods, different notices were given. The details of the show-cause notices, the period, the number of tractors and Automobile Cess payable are as under: Sl No. Show cause notice & date Period Qty. No of tractor Automobile cess payable 1. SCN/Telco-1/12/99/101 8 dated 02.07.99 December 98 to April, 99 117 Nos. Rs. 86,360.75 2. SCN/23/Telco-1/99/163 2 dated 03.11.1999 May, 99 to September, 99 203 No.s Rs. 1,53,188.64 3. SCN/Telco-1/5-11A/200 0/400 dated 04.04.2000 October, 99 to February, 2000 201 Nos. Rs. 1,61,046.03 4. SCN/Telco-1/14....
X X X X Extracts X X X X
X X X X Extracts X X X X
....75] 2 SCC 22 and the CESTAT, Kolkata allowed the appeals preferred by the respondent-assessee and set aside the penalty imposed by the present appellant in Order-in-Original, which was confirmed in Order-in-Appeal, as there was no specific penalty provision. Being aggrieved and dissatisfied by the orders passed by the Customs, Excise and Service Tax Appellate Tribunal, Kolkata these appeals have been preferred by the appellant. Argument canvassed by the counsel appearing for the appellant : 7. Counsel appearing for the appellant vehemently submitted that no error has been committed by the appellant in imposing the penalty under Section 173 (Q) of the Central Excise Rules, 1944 because under Rule 3 of the Automobile Cess Rules, 1984 the provisions of Central Excise Act, 1944 and the Rules made thereunder are applicable to the levy and collection of Automobile Cess. Thus, if there is non-payment of Automobile Cess under Automobile Cess Rules,1984 enacted under Section 30 of the Industries (Development and Regulation) Act, 1951 the provisions of the Central Excise Act and Rules are applicable. There is no need for separate mentioning of penalty under Automobile Cess Rules. Th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e CESTAT, Kolkata in allowing the appeals preferred by the respondent. It is submitted by the counsel for the respondent that the penalty is not incidental to the assessment nor it is a mere consequence of the assessment. Penalty is an addition to the tax or is an addition to the liability and therefore, there must be a provision for penalty and there is no provision of penalty under the Automobile Cess Rules, 1984 nor under the Parental Act, i.e. under the Industries (Development and Regulation) Act, 1951 and therefore, penalty cannot be imposed upon the respondent. There must be a specific provision for imposition of the penalty. 10. Counsel for the respondent further submitted that Rule 3 of the Automobile Cess Rules, 1984 is only for the purpose of following the procedure of the Central Excise Act and Rules made thereunder for the levy and collection of the Cess, but so far as the penalty is concerned there bound to be specific provision under the rules or under the parental Act and if there is no specific provision for imposition of penalty, the same cannot be imposed by the appellant under Rule 173 (Q) of the Central Excise Rules, 1944. 11. Counsel appearing for the res....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ained in section 11AB, where a person chargeable with duty determined under sub-section (2) of section 11A, fails to pay such duty within three months from the date of determination, he shall pay, in addition to the duty, interest at such rate not below ten per cent, and not exceeding thirty-six per cent. Per annum, as is for the time being fixed by the Central Government, by notification in the Official Gazette on such duty from the date immediately after the expiry of the said period of three months till them date of payment of such duty........................ .............................................................................." (Emphasis Supplied) (c) Rule 173 (Q) of the Central Excise Rules, 1944 reads as under :- "Rule [173 Q. Confiscation and penalty.- (1) If any manufacturer, producer or [registered person] of a warehouse,- (d) contravenes any of the provisions of these rules with intent to evade payment of duty, then, all such goods shall be liable to confiscation and the manufacturer, producer or [registered person] of the warehouse, as the case may be, shall be liable to a penalty not exceeding three times the value of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lso applicable. We are not in agreement with this contention mainly looking to paragraph 24-25, 26 and 28 of the decision rendered by Hon'ble the Supreme Court in Khemka & Co. (supra), which read as under : "24. The Income Tax Act, 1961 imposes penalty under Sections 270 and 271. These sections in the Income Tax Act provide for imposition of penalty on contumacious or fraudulent assessee. Penalty is in addition to income tax, if any, determined as payable by the assessee. Tax and penalty like tax and interest are distinct and different concepts under the Indian Income Tax Act. The word "assessment" could cover penalty proceedings if it is used to denote the whole procedure for imposing liability on the taxpayer as happened in Abraham's case (supra). Penalty is within assessment proceedings just as tax is within assessment proceedings when the relevant Act by substantive charging provision levies tax as well as penalty. 25. Penalty is not merely sanction. It is not merely adjunct to assessment. It is not merely consequential to assessment. It is not merely machinery. Penalty is in addition to tax and is a liability under the Act. Reference may be m....
X X X X Extracts X X X X
X X X X Extracts X X X X
....." (Emphasis Supplied) Thus, tax and penalty like tax and interest are distinct and different. Penalty is neither merely incidental to the assessment nor it is merely consequent to the assessment. In fact, penalty is an addition to the tax and addition to the liability. Penalty is not a continuation of the assessment proceeding. In fact, penalty is a statutory liability. For imposing penalty, there bound to be provision for penalty under the Automobile Cess Rules, 1984, but, in fact, looking to Automobile Cess Rules, 1984, there is no such provision for imposition of penalty nor there is any provision of penalty under the parental Act, i.e. Industries (Development and Regulation) Act, 1951 and hence penalty cannot be imposed under Section 173 (Q) of the Central Excise Rules, 1944. (IV) There is already a provision for the payment of interest under Section 11AA of the Central Excise Act, 1944, as was prevailing at the relevant time if the duty is not paid within a period of three months after the assessment the interest, minimum at the rate of 10 % and maximum at the rate of 36%. As stated herein above, after adjudication of the liability after order dated 30/31....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cealment of income. Penalty is in addition to the amount of income tax. This Court in Jain Bros. v. Union of India said that penalty is not a continuation of assessment proceedings and that penalty partakes of the character of additional tax. 26. The Federal Court in Chatturam v. CIT said that liability does not depend on assessment. There must be charging Section to create liability. There must be first a liability created by the Act. Second, the Act must provide for assessment. Third, the Act must provide for enforcement of the taxing provisions. The mere fact that there is machinery for assessment, collection and enforcement of tax and penalty in the State Act does not mean that the provision for penalty in the State Act is treated as penalty under the Central Act. The meaning of penalty under the Central Act cannot be enlarged by the provisions of machinery of the State Act incorporated for working out the Central Act."' (Emphasis Supplied) (VI) In view of the aforesaid decision also penalty cannot be imposed without there being specific provision for the penalty despite Rule 3 of the Automobile Cess Rules. 1984. Rule 3 of the Rule of 1984 cannot be ope....