2016 (10) TMI 956

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..../2005-EX(DB). The question of law sought to be answered is as under:- "Whether, mandatory quantum of penalty equal to the amount of duty prescribed under Rule 96ZO (3) (ii) of erstwhile Central Excise Rules, 1944, can be reduced?" This very question of law has been answered in favour of the assessee and against the department by the Apex Court in the case of Shree Bhagwati Steel Rolling Mills vs. Commissioner of Central Excise reported in 2015 (326) E.L.T. 209, wherein the Apex Court has held that when contrasted with the provisions of the Central Excise Act itself, the penalty provisions contained in Rules 96ZO, 96ZP and 96ZQ are both arbitrary and excessive. A penalty can only be levied by authority of statutory law, and Section 37 of....

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....datory penalty of an equivalent amount of duty would be compulsorily leviable and recoverable from such Assessee. This would be extremely arbitrary and violative of Article 14 for this reason as well. Further, we agree with the High Court in stating that this would also be violative of the Appellant's fundamental rights Under Article 19(1)(g) and would not be saved by Article 19(6), being an unreasonable restriction on the right to carry on trade or business. Clearly the levy of penalty in these cases of a mandatory nature for even one day's delay, which may be beyond the control of the Assessee, would be arbitrary and excessive. In such circumstances, this Court has held in Md. Faruk v. State of M.P. MANU/SC/0046/1969 : 1970 (1) SC....

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....becomes clear how arbitrary and excessive they are. 37. Section 37(3) and 37(4) of the Central Excise Act reads as follows: Section 37. Power of Central Government to make rules.- (3) In making rules under this section, the Central Government may provide that any person committing a breach of any rule shall, where no other penalty is provided by this Act, be liable to a penalty not exceeding five thousand rupees. (4) Notwithstanding anything contained in Sub-section (3), and without prejudice to the provisions of Section 9, in making rules under this section, the Central Government may provide that if any manufacturer, producer or licensee of a warehouse- (a) removes any excisable goods in contravention of the provisions of a....