(Per : HONOURABLE MS. HARSHA DEVANI) This appeal challenges order dated 26.08.2005 passed by the Customs, Excise and Service Tax Appellate Tribunal, whereby the Tribunal has refused the penalty imposed under rule 96ZQ(5)(ii) of the Central Excise Rules, 1944.
The respondent assessee is engaged in the manufacture of excisable man made fabrics (processed) under the compounded levy scheme. For failure to pay Central Excise duty within the prescribed period, proceedings came to be initiated against the assessee by issuance of a show cause notice, which culminated into an order in original whereby the adjudicating authority, inter alia imposed penalty under rule 96ZQ (5)(ii) read with rule 173Q(1) of the Central Excise Rules, 1944. Being aggrieved the assessee went in appeal to the Commissioner (Appeals) who reduced the penalty. The assessee carried the matter in further appeal before the Tribunal, which further reduced the penalty and directed refund of the excess amount of penalty.
While admitting the appeal, this Court had formulated the following substantial question of law:
"Whether the Commissioner (Appeals) as well as Hon'ble Tribunal are legally empowered to reduce the mandatory equal amount of penalty as stipulated under Rule 96ZQ(5)(ii) of Central Excise Rule, 1944?"
Insofar as the question formulated by this court while admitting the appeal is concerned, the Supreme Court in the case of Union of India vs. Dharmendra Textile Processors, 2008 (231) ELT 3 (S.C.) had held that the rule 96 ZQ(5)(ii) of the Rules is mandatory in nature and there is no discretion vested in the adjudicating authority to levy lesser amount of penalty. Hence, the question would be required to be answered in the affirmative, that is, against the assessee and in favour of the revenue. It may be, however, noted that subsequently, in the case of Union of India and others vs. M/s. Krishna Processors and another, the Supreme Court while holding that in view of its decision in Union of India vs. Dharmendra Textile Processors, 2008 (231) ELT 3 (S.C.), rule 96ZQ is mandatory, further held that the consequence of the said judgment in Dharmendra Textile Processors is that the challenge to the vires of rule 96ZQ(5)(ii) in the original writ petitions before the High Courts stands revived, and, accordingly, remitted the entire batch of civil appeals to the respective High Courts for deciding the question of vires of the above sub-rule. Pursuant to the matter being remitted, this court in Krishna Processors v. Union of India, 2012 (280) ELT 186 (Guj.) has held that rule 96ZQ(5)(ii) of the Rules is ultra vires Articles 14, 19(1)(g) and 265 of the Constitution of India. It has been further held that after the omission of rules 96ZQ, 96ZP and 96ZO of the Rules with effect from 1st March, 2001 no proceedings could have been initiated thereunder and after the omission of section 3A of the Act with effect from 11th May, 2001, without any saving clause, no pending proceeding under the said rules which had not been concluded before the omission came into effect, could be concluded thereafter. It was, accordingly, held that the proceedings culminating into the orders impugned therein, having been initiated/concluded after the omission of rules 96ZQ, 96ZP and 96ZO of the rules and section 3A of the Act are, therefore, without authority of law.
In the facts of the present case, the order in original has been passed by the adjudicating authority on 20.09.2001 after the omission of section 3A of the Act with effect from 11th May, 2001 and as such in view of the decision of this court in Union of India and others vs. M/s. Krishna Processors and another, after 11th May, 2001 it was no longer permissible for the adjudicating authority to proceed further pursuant to the show cause notice and conclude the proceedings. Moreover, when rule 96ZQ(5)(ii) of the Rules itself has been struck down as being unconstitutional, the question as to whether or not the same in mandatory in nature becomes redundant.
For the foregoing reasons, the controversy raised in the present appeal would no longer survive. The appeal is accordingly dismissed as having become infructuous.
[AKIL KURESHI, J.] [HARSHA DEVANI, J.] Jyoti Top