Hon. Aditya Nath Mittal, J.
1. We have heard Shri Ashok Singh for the appellant and Shri Sharad Malviya for the respondent-assessee.
2. This Central Excise Appeal under Section 35-G of the Central Excise Act, 1944 arises out of an order passed by the Customs, Excise and Service Tax Appellate Tribunal, New Delhi (the Tribunal) dated 25.6.2004 dismissing the appeal and confirming the order of the Commissioner of Appeals, by which he had set aside the penalty levied on the respondents in view of the judgment of Madras High Court in Beauty Dyers v. Union of India & Ors., 2002 (52) RLT 636 (Mad.).
3. The facts giving rise to this appeal filed by the Commissioner, Customs and Central Excise are that M/s Webbing and Belting Pvt. Ltd. (the respondent company) is engaged in the processing of fabrics under Chapter Heading No.52 & 54 of CETA 1985. The respondents were working under the compounded levy Scheme as per the provisions of Notification No.43/98 dated 10.12.1998, as amended during the period April 1999 to February 2001. The annual capacity of production was fixed provisionally by the Commissioner, Central Excise, Meerut vide order dated 17.3.99/3.5.99 and finally on 8.3.2001.
4. The respondent did not pay the excise duty during the period April 1999 to Feb. 2001, on the due dates under Rule 96 ZQ (3) of the Central Excise Rules, 1944. Thereafter the respondent paid the duty along with due interest on the late payment. It was found that the respondent had contravened the provisions of Rule 96ZQ (3), of the then applicable Central Excise Rules, 1944 and rendered itself liable to penalty equal to the amount of duty outstanding at the end of each month amounting to Rs.45,00,000/- (Rupees Forty Five Lacs), which was not paid within the stipulated time limit. On 21.11.2001 a show cause notice was issued to the respondents as to why the penalty be not imposed equal to the amount of duty outstanding at the end of each month under rule 96 ZQ (5) (ii) of the Rules.
5. The Dy. Commissioner, Central Excise, Division Ghaiabad passed an order adjudicating the matter, after giving personal hearing and going through the reply. He found that the respondent had sound business in financial years 1999-2000; 2000-01, as compared to Financial Year 1997-98 and 1998-99. By the order in original dated 28.2.2002 the penalty of Rs.45,00,000/- was confirmed.
6. The respondent filed an appeal before the Commissioner (A), Central Excise, Ghaziabad. He allowed the appeal on 14.11.2003 relying upon the decision of CEGAT, Mumbai, by which the provisions of Rule 96ZQ for levy of penalty were held to be ultra vires. Aggrieved the Commissioner of Central Excise, Ghaziabad filed an appeal in the Tribunal, which has been dismissed.
7. This central excise appeal was admitted on the question of law as follows:-
"Whether the appellate Tribunal on the facts and circumstances of the case could set aside the penalty in erstwhile Rule 96ZQ of Central Excise Rules, 1944?"
8. It is submitted by Shri Ashok Singh appearing for the Commissioner, Central Excise, Ghaziabad, that the Tribunal failed to appreciate that the Central Government is empowered to make the rules for determination of annual capacity of production (ACP) under Section 3A (2) of the Central Excise Act, 1944. The proviso to sub-section provides that where a factory producing the notified goods is in operation only during a part of the year, its production shall be calculated on proportionate basis of the annual capacity of productions. The respondent had defaulted many times for a period ranging from 3 days to 111 days, on the plea of financial hardships in depositing the compounded duty.
9. It is submitted that he Tribunal's observation that "the Commissioner (Appeals) after following the decision in the case of Beauty Dyers v. Union of India (Supra) set aside the penalty" does not appear correct to the extent that the Commissioner (Appeals) did not make direct reference to the said High Court order, instead the ratio of the decision of the Tribunal given in the case of Shree Sai Prasad Dyes & Ptg. Mills v. CCE, Surat, 2002 (56) RLT 100, wherein the case of Beauty Dyers was referred to. The respondent had done extremely good business in the financial year 1999-2000 and 2000-01. The production in metric tonnes in these two years was 2378551.5 q.mtrs. in 1999-2000 and 2374220.82 q.mtrs. in the year 2000-01, as compared to 36740.32 q.mtrs. in 1997-98 and 405292.50 q. mtrs. in 1998-99, and the ground of default was non-existing.
10. The sub-rule (3) of the Rule 96ZQ of the erstwhile Rule reads as follows:-
"The amount of duty payable under sub-rule (1) shall be paid by the 5th of each calendar month".
11. Sub-rule (5) of the Rule 96ZQ reads as under:-
"If any independent processor fails to pay the amount of duty or any part thereof by the date specified in sub rule (3), he shall be liable to-
a) Pay the outstanding amount of duty along with interest at the rate of thirty six percent per annum calculated for the outstanding period on the outstanding amount; and
(b) A penalty equal to an amount of duty outstanding from him or rupees five thousand, which ever is greater."
12. It is submitted that in similar parallel provisions under rule 96ZP, meant for manufacture of Hot Rolled products, this Court in PEE AAR Steels (P) Ltd. v. Commissioner of Central Excise, Meerut, 2004 (170) ELT 406 (All) held that the penalty mentioned in the fourth proviso to Rule 96 ZP (3), is not the maximum penalty but the only penalty, and hence such penalty has to be levied whenever there is failure to pay the duty by 10th of the month. The Tribunal was thus not competent to reduce the penalty under the Proviso to Rule 96ZP (3) of the Central Excise Rules, 1944.
13. Shri Ashok Singh has relied upon the recent decision of a Division Bench of this Court in Commissioner of Customs & Central Excise v. M/s Majestic Auto Ltd., Central Excise Appeal No.142 of 2004 decided on 6.7.2012 in which this Court considering Section 11AC, which provides for levy of penalty as a successor of Rule 76ZP (3) held as follows:-
"From the proposition as laid down in above cases, the ratio deducible is that the quantum of the penalty equal to the duty determined as contemplated by Section 11AC is mandatory and there is no discretion in the adjudicating authority or the Tribunal to impose different amount of penalty. In a case where penalty is leviable under section 11AC on fulfilment of the conditions as enumerated in Section 11AC, the penalty equal to the amount of duty determined is mandatory and there is no discretion in the Tribunal to reduce the said penalty. However, as laid down by the apex Court in Union of India Vs. Rajasthan Spinning and Weaving Mills (supra), the penalty under section 11AC can be imposed only when conditions mentioned in Section 11AC exist. The authorities have no discretion in fixing the quantum of penalty and penalty equal to the duty must be imposed once section 11Ac is made applicable.
In view of the foregoing discussions, the question of law is answered in favour of the revenue in following manner.
"The appellate Tribunal had no discretion to reduce the amount of penalty as specified under section 11 AC"
The appeal is allowed. Parties shall bear their own cost."
14. Shri Sharad Malviya appearing for the respondent has defended the order of the Tribunal. He submits that in Beauty Dyers v. Union of India (Supra) the Madras High court held that levy of interest on penalty under the Rule is not unreasonable. If the appellant had advantage of keeping the amount of tax without paying it to the State exchequer, the penalty was leviable. In that case the petitioners had filed writ petitions only on the basis that the authorities were informed that if the amount is not paid, they will levy charges as per Rule 96ZQ. As regards panel interest at 36% under Rule 96ZQ, it is reasonable as the party had the advantage of keeping the tax without paying it to the State exchequer and that they would earn good profit from the amount. As regards penalty the Madras High Court observed that the penalty mentioned in Rule 96ZQ should be taken as the maximum amount which would be levied and the assessing authority has discretion even to levy lesser amount of penalty depending upon the facts and circumstances of each case. The Madras High Court relied upon State of Madhya Pradesh v. Bharat Heavy Electricals, 1998 (99) E.L.T. 33 (S.C.), and Calcutta Jute Manufacturing Co. v. Commercial Tax officer, 1997 (93) E.L.T. 657 (SC). In both these cases the provisions of law other than Section 96ZQ were under consideration. The judgment in State of Madhya Pradesh v. Bharat Heavy Electricals (Supra) was based upon the concession in which learned counsel for the State submitted that the State can levy penalty equal to ten times amount of entry tax as maximum limit and has not fixed any amount of penalty leaving no discretion for imposition of lesser penalty. The Supreme Court found that the State itself conceded that the assessing authority is not bound to levy fixed penalty equal to ten times.
15. In the present case it is admitted that the penalty was leviable as the compounded amount was not deposited by 10th of the month on which the penalty was leviable equal to the amount of excise duty. The question whether there is any discretion to levy penalty was considered by this Court in Commissioner of Customs and Central Excise v. M/s Majestic Auto Ltd. (supra). After referring to Union of India v. M/s Dharmendra Textile Processors, 2008 (231) E.L.T. 3 (SC), which dealt with the question of levy of penalty under Section 96ZQ and Rule 96ZO and had held that various degrees of culpability cannot be placed on the same pedestal, Section 11AC can not be construed in a manner by reading into it any discretion; that would be the proper way to give effect to the statutory intention.
16. This Court also considered the ratio of the decision in Union of India v. Rajasthan Spinning & Weaving Mills Ltd., 1998 (99) E.L.T. 33 (SC) in which the provisions of Section 11AC had come up for consideration, and the judgment of the Apex Court in Dharmendra Textile Processors. The Supreme Court held in para 18 as under:-
"18. One can not fail to notice that both the proviso to Sub section 1 of Section 11A and Section 11AC use the same expressions: "...by reasons of fraud, collusion or any wilful mis-statement or suppression of facts, or contravention of any of the provisions of this Act or of the rules made thereunder with intent to evade payment of duty...." In other words the conditions that would extend the normal period of one year to five years would also attract the imposition of penalty. It, therefore, follows that if the notice under Section 11A (1) states that the escaped duty was the result of any conscious and deliberate wrong doing and in the order passed under Section 11A(2) there is a legally tenable finding to that effect then the provision of Section 11AC would also get attracted. The converse of this, equally true, is that in the absence of such an allegation in the notice the period for which the escaped duty may be reclaimed would be confined to one year and in the absence of such a finding in the order passed under Section 11A(2) there would be no application of the penalty provision in Section 11AC of the Act. On behalf of the assessees it was also submitted that Sections 11A and 11AC not only operate in different fields but the two provisions are also separated by time. The penalty provision of Section 11AC would come into play only after an order is passed under Section 11A(2) with the finding that the escaped duty was the result of deception by the assessee by adopting a means as indicated in Section 11AC."
17. On the above discussion, we are of the view that the Tribunal wrongly relied on the ratio of Beauty Dyers v. Union of India (Supra) decided by the Madras High Court. The question whether the penalty can be levied and whether there is any discretion in levy of penalty, stand covered by the judgment of this Court in Commissioner of Customs & Central Excise v. M/s Majestic Auto Ltd. (Supra).
18. The Central Excise Appeal is allowed. The order passed by the Customs, Excise and Service Tax Appellate Tribunal, New Delhi dated 25.6.2004 and the order of the Commissioner (Appeals) are set aside. The question of law is decided in favour of the revenue and against the respondent-assessee. The central excise department will proceed accordingly.
Dt.08.11.2012 SP/