TaxTMI 
TaxTMI 
2019 (12) TMI 530
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....e Asst Commissioner of Central Excise vide Order-in- Original No. 13 /2015 dated 05.02.2015 had appropriated a sum of Rs. 2,25,493/- being the Cenvat Credit purportedly passed on by the appellant wrongly to its customers pursuant to SCN.No.17/2014 dated 30.07.2014. 5.The Asst Commissioner of Central Excise had also imposed an equal amount of penalty under Rule26(2)(ii) of the Central Excise Rules, 2002 vide the aforesaid order. 6.In the present appeal, the appellant has questioned the wisdom of the Asst Commissioner of Central Excise, Appellate Commissioner and the Tribunal in imposing, affirming and upholding penalty under Rule 26(2)(ii) of the Central Excise Rules, 2002 equivalent to the amount of Cenvat Credit purportedly passed on to the buyers wrongly by the appellant. 7.In the present appeal the appellant has raised the following questions of law for our consideration:- a) Whether the tribunal is right in not adhering to the statute, by imposing more penalty than subscribed under Rule 26? b) Whether the tribunal is right in imposing penalty equal to amount of alleged duty and treating it as message an instrument for the society to abide the law? 8.The above two questi....
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....eard the learned counsel for the appellant M/s.Sridevi and the Learned Senior Standing Counsel for Central Government Mr.A.P.Srinivas. For proper determination of these issues, it will be useful to refer to Rule. Rule 26 of the Central Excise Rules 2002 reads as under:- Penalty for certain offences.- (1)Any person who acquires possession of, or is in any way concerned in transporting, removing, depositing, keeping, concealing, selling or purchasing, or in any other manner deals with, any excisable goods which he knows or has reason to believe are liable to confiscation under the Act or these rules, shall be liable to a penalty not exceeding the duty on such goods or two thousand rupees, whichever is greater. (2)Any person, who issues - i)anexcise duty invoice without delivery of the goods specified therein or abets in making such invoice; or ii)any other document or abets in making such document, on the basis of which the user of said invoice or document is likely to take or has taken any ineligible benefit under the Act or the rules made there under like claiming of CENVAT credit under the CENVAT Credit Rules, 2004 or refund, shall be liable to a penalty not exceeding th....
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....e to a penalty not exceeding the duty leviable on such goods or ten thousand rupees, whichever is greater;" 20.From a reading of the above Sub-Sections to Section 37, it is evident that penalty under Rule 26 of Central Excise Rules, 2002 is traceable to power vested with the Rule making authority under Subclause (3) and not under Sub clause (4) of Section 37 of the Central Excise Act, 1944. Therefore, maximum penalty which can be imposed is only Rs. 5000/- under Rule 26 of the Central Excise Rules, 2002. 21.Even otherwise, the language adopted in Clause (ii) to Sub- Rule (2) to Rule 26 is clear. Any person, who issues any excise duty invoice without delivery of goods specified therein or abets making such invoice; or any other document or abets in making such document, on the basis of which the user of the said invoice or document is likely to take or has taken any in-eligible benefit under the Act or the rules made their under like claiming of Cenvat Credit under the Cenvat Credit Rules, 2004 or refund, such person shall be liable to a penalty not exceeding the amount of such benefit passed on or Five Thousand Rupees, which ever is greater. 22.The aforesaid provision fixes a st....
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.... to observe that while interpreting the expression "whichever is greater" while dealing with Rule 96 ZQ and Rule 96ZO of the erstwhile Central Excise Rules, 1994 and Section 11 AC of the Central Excise Act, 1944 the larger Bench of the Hon'ble Supreme Court in Union of India vs Dharamendra Textile Processors, 2008 (231) ELT 3 (SC), held as under:- 19. In Union budget of 1996-97, Section 11 AC of the Act was introduced. It has made the position clear that there is no scope for any discretion. In paragraph 136 of the Union Budget reference has been made to the provision stating that levy of penalties are mandatory penalty. In the Notes On Clauses also the similar indication has been given. 20. Above being the position, the plea that Rules 96-ZQ and 96-ZO have a concept of discretion inbuilt cannot be sustained. Dilip Shroff case [(2007) 6 SCC 329 : (2007) 8 Scale 304] was not correctly decided but SEBI case [(2006) 5 SCC 361] has analysed the legal position in the correct perspectives. The reference is answered. The matter shall now be placed before the Division Bench to deal with the matter in the light of what has been stated above, only so far as the cases where challenge to v....
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.... amount; and (ii)A penalty equal to an amount of duty outstanding from him or rupees five thousand, whichever is greater." 30.Though the Hon'ble Supreme Court has held that Rule 96-ZO and Rule 96-ZQ of the Central Excise Act, 1944 do not give discretion to the adjudicating authority, the Honourable Supreme Court in Shree Bhagwati Steel Rolling Mills v. CCE, (2016) 3 SCC 643 has held that these provisions of the Rules were ultra vires of the provisions of Act and has held 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. 5000 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 noticed that the Act is very circumspect in laying down penalty provisions. Penalties in given circumstances extend only to Rs. 5000 and Rs. 10,000 which are small amounts. Further, even where clandestine removal and intent to evade du....
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.... (5) Where a registered dealer referred to in subsection (1) or sub-section (2) has, in the course of his business, sold local goods to other registered dealers and has failed to make the statement referred to in sub-section (1) [...], it shall be presumed that he has facilitated the evasion of entry tax on the local goods so sold and accordingly he shall be liable to pay penalty equal to [ten times] the amount of entry tax payable on such goods as if they were not goods of local origin. (6) ....... 33.Though the validity of the provisions of the said Act was subject matter of the case, the Hon'ble Supreme Court interpreted the provisions and held that the assessing authorities are not bound to levy fixed penalty equal to ten times the amount of entry tax whenever the provisions of Section 7(5) are attracted. It held that depending upon the facts of each case the assessing authority has to decide as to what would be the reasonable amount of penalty to be imposed, the maximum being ten times the amount of the entry tax. The court further held as under:- 14. From the aforesaid it follows that Section 7(5) has to be construed to mean that the presumption contained therein i....
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....en on the said capital goods reduced by the percentage points calculated by straight line method as specified below for each quarter of a year or part thereof from the date of taking the CENVAT Credit, namely:- (a) for computers and computer peripherals: for each quarter in the first year @ 10% for each quarter in the second year @ 8% for each quarter in the third year @5% for each quarter in the fourth and fifth year @1% (b) for capital goods, other than computers and computer peripherals @ 2.5% for each quarter. 38.If credit was wrongly availed, specific provision is provided under the Rules to the recover Cenvat Credit wrongly taken or erroneously refunded under Rule 14 of the Cenvat Credit Rules, 2004 which reads as under:- RULE 14. Recovery of CENVAT credit wrongly taken or erroneously refunded. - (1) (i)Where the CENVAT credit has been taken wrongly but not utilized, the same shall be recovered from the manufacturer or the provider of output service, as the case may be, and the provisions of section 11A of the Excise Act or section 73 of the Finance Act, 1994 932 of 19940, as the case may be, shall apply mutatis mutandis for effecting such recoveries; (ii) Wh....