IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL No. 2330 of 2010 For Approval and Signature:
HONOURABLE MR.JUSTICE V. M. SAHAI HONOURABLE MR.JUSTICE N.V. ANJARIA ================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ?
2 To be referred to the Reporter or not ?
3 Whether their Lordships wish to see the fair copy of the judgment ?
Whether this case involves a substantial 4 question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ?
5 Whether it is to be circulated to the civil judge ?
========================================================= COMMISSIONER OF CENTRAL EXCISE & CUSTOMS Appellant(s) Versus M/S ZENITH FIBERS LTD Opponent(s) ========================================================= Appearance :
MR YN RAVANI for Appellant(s) : 1, RULE SERVED for Opponent(s) : 1, ========================================================= CORAM : HONOURABLE MR.JUSTICE V. M. SAHAI and HONOURABLE MR.JUSTICE N.V. ANJARIA Date : /10/2012 CAV JUDGMENT (Per : HONOURABLE MR.JUSTICE N.V. ANJARIA) The present appeal under Section 35G of the Central Excise Act, 1944 arises out of the order dated 29th April 2010 passed by the Customs, Excise and Service Tax Appellate Tribunal, West Zone Bench, Ahmedabad in Appeal No.E/2652 of 2005.
2 The appeal was admitted on the following question of law:
“Whether the Tribunal is right in law and in facts in deleting the penalty imposed u/s. 11AC of the Central Excise Act, 1944 by the Assessing Officer and confirmed by the Appellate Authority?”
3 The facts involved in the present appeal are set out as follows. The respondentassessee M/s Zenith Tribes Limited is engaged in manufacturing of Polypropylene Staple Fiber, which are excisable goods. It avails cenvat facility. On 30th August 2001, the officers of Excise Department visited the factory premises of the respondent and during physical verification of the finished goods lying there, they found shortage of finished goods of 10210 kg against the stock mentioned in the daily stock register. In terms of the value, the shortage was of Rs.8,60,612/ and the duty payable was determined at Rs.1,40,898/. The assessee thereupon paid Rs.1,22,520 on 30th August 2001 and Rs.18,378/ on 31st August 2008 thereby paying up the total duty of Rs.1,40,898.
3.1 The above investigation resulted into a show cause notice dated 6th March 2003 by the Joint Commissioner of Central Excise, wherein the assessee was called upon to show cause as to why excise duty amounting to Rs.1,40,898/, the equivalent penalty as well as the interest should not be recovered/the duty should not be appropriated. It was alleged in the showcause notice that the assessee had failed to keep the prescribed invoices and maintain the accounts with an intent to evade the excise duty.
3.2 The aforementioned show cause notice culminated into order dated 22nd January 2004 by the Assistant Commissioner of Central Excise and Customs, Division I, Vadodara. It did not accept the case of the assessee that the shortage was not due to any clandestine removal. Accordingly, the adjudicating authority ordered recovery of Rs.1,40,898/ under Section 11A of the Act and appropriation of the said amount which was already paid by the assessee. Under Section 211AC of the Act, an amount equivalent to the aforesaid amount of duty was imposed as penalty. It was also ordered to charge interest under Section 11AB of the Act.
3.3 The assessee thereafter preferred an appeal before the Commissioner (Appeals) against the aforesaid OrderinOriginal (OIO). The Appellate Commissioner dismissed the appeal and confirmed the demand of duty and the interest. The aggrieved assessee carried the matter further by way of appeal before the Tribunal. The Tribunal by its order dated 20th March 2006 held that since the amount of duty was already paid before issuance of the showcause notice, the penalty and interest was not payable. The said order reads as under: “1. Heard both sides.
2. The learned advocate appearing on behalf of the appellants submits that the entire duty amount has already been paid before issue of the Show Cause Notice and the same is not being contested. As regards the penalty and the interest, he submits that in the light of the decision of the larger Bench in the case of Machinao Montell India Ltd. vs. CCE, Delhi III reported in 2004 (62) RLT 709 (CESTATLB) when the duty amount has already been paid before issue of the show cause notice, the penalty and the interest is not impossible.
3. The ld. JDR could not cite any contrary decision. He, however, reiterated the impugned order.
4. Since the duty amount is paid before issue of the show cause notice and the same is not being contested, applying the ratio of the said larger Bench decision, I find that the penalty and interest is not impossible. I, therefore, confirm the duty amount and as regards the penalty and interest, the same is set aside.”
3.4 It appears that against the aforesaid order dated 20th March 2006, the department had preferred Tax Appeal No.1275 of 2006 before this Court. By oral order dated 23rd June 2009 passed in the said appeal, a Division Bench of this Court set aside the order of the Tribunal and remanded the matter to the Tribunal for consideration of applicability of Section 11AC of the Act in light of the judgments of Apex Court in the case of Union of India v. Dharmendra Textile Processors, (2008) 13 SCC 369 and in the case of Union of India v. Rajasthan Spinning and Weaving Mills & Another, (2009) 92 RLT 691 (SC).
3.5 The order impugned is one passed on remand as aforesaid, in which the Tribunal reasoned that the shortage was admitted and there was no further investigation to establish the clandestine removal and therefore penalty under Section 11AC was not imposable. The impugned order is also extracted hereinbelow to indicate as to how the Tribunal dealt with the issue upon remand order by this Court:
“M/s Zenith Fibers Limited (ZFL) are engaged in the manufacture of polypropylene staple fiber. During a visit of the factory on 30th August 2001 and physical verification of the stock, shortage of 10,210 kg of finished goods was notice. The General Manager of the Company admitted the shortage and duty amount of Rs.1,40,898/0 was immediately paid. Thereafter, showcause notice was issued and after adjudication, the Original Adjudicating Authority imposed a penalty of Rs.1,40,898/ under Section 11AC of Central Excise Act, besides confirming the duty demand. The matter reached the Tribunal and the Tribunal vide Order No.A/493/III/SMC/WZB/2006 dated 20.03.2006 set aside the penalty and interest on the ground that the duty was paid before issue of show cause notice and was not decided.
2. Revenue went in appeal against this decision and Hon'ble Gujarat High Court remanded the matter to this Tribunal with the following directions:
“The order passed by the Tribunal is set aside and the matter is remanded back to the Tribunal for reconsideration of the question of applicability of Section 11AC of the Central Excise Act in light of the judgements of the Apex Court in the case of Union of India v. Dharmendra Textile Processors, 2008 (231) ELT 3 and in the case of Union of India v. Rajasthan Spinning & Weaving Mills & Anr. 2009 (92) RLT 691 (SC). The appeal stands disposed of accordingly.”
3. The learned advocate for ZFL submitted that this is not a case where Section 11AC could have been invoked. According to him him this is a case of admitted shortage followed by no investigation whatsoever. He relied upon several decisions of the Tribunal to support his contention that in such cases no penalty under Section 11AC is imposable.
1. CCE Kanpur v. Raghunath International Ltd. (2009 (246) ELT 395 (Tri. Del.)
2. CCE Ahmedabad v. Alfa ICA (I) Ltd. [2008 (222) ELT 255 (TriAhmd.)]
3. Max Worth Plywoods P. Ltd. v. CC & CE, Visakhapatnam [2010 (250) ELT 407 (Tri – Bang.)]
4. Aishwarya Plast Exports Pvt. Ltd. v. CCE Vadodara [2009 (246) ELT 728 (Tri. Ahmd.)]
5. Kanpur Strips (P) Ltd. v. CCE KanpurII [2001 (137) ELT 1198 (Tri.Del.)] I find myself in agreement with the learned advocate in view of the precedent decisions wherein Tribunal has taken a view that in cases of shortages conducted and admitted without investigation to establish evidences of clandestine removal, penalty under Section 11AC is not imposable. This was the only issue which was required to be considered by the Tribunal in terms of the directions of the Honourable Gujarat High Court. In view of the above discussion, I find that no change is required in the order passed by this Tribunal. The appeal of the party is disposed off.”
4 Heard learned advocate Mr Y.N. Ravani for the Department. None appeared on behalf of the respondent thought the rule was served as per the endorsement of the Registry.
5 In the Memorandum of Appeal, it was contended to the effect that the Tribunal could not have applied the Proviso to Section 11AC of the Act and the benefit of reduced penalty of 25% thereunder could not have been granted. It was contended that Proviso to Section 11AC would apply when the duty is paid along with interest and the penalty within 30 days. In the context of the contents of impugned order of the Tribunal, the ground canvassed did not bear relevance inasmuch as the Tribunal allowed the appeal of the assessee on the footing that the penalty under Section 11AC was not imposable because, the assessee having admitted the short duty payable and having paid the same, the clandestine removal was not established on evidence.
6 However, having considered the total compass of the matter, it was clear from the order of remand passed by this Court in Tax Appeal No.1275 of 2006 that the issue was remitted back to the Tribunal and the Tribunal was directed to consider and decide the same in light of the two Apex Court decisions in the case of Dharmendra Textile Processors (supra) and Rajasthan Spinning and Weaving Mills (supra). From the impugned order of the Tribunal, extracted hereinabove, it was noticed at the outset that the Tribunal did not discuss the issue with reference to those decisions of the Apex Court.
6.1 When the Tribunal was specifically directed to consider said decisions by an order of this Court, the Tribunal was duty bound to consider the same and render its decision with reference to and in light of the law laid down by the Apex Court. When a lower Court or quasijudicial authority or the Tribunal is directed by the High Court to decide a question in a particular manner or with reference to a particular decision, such lower court or authority would be required to decide the issue in that manner only. The cryptic approach, as is reflected from the impugned order, cannot be justified. It is always permissible for the Tribunal to take a particular view and arrive at its own conclusion, however, the order it may pass has to be in conformity with the directions issued by this Court while remanding the matter.
7 In view of the above, it is deemed appropriate that the matter is again remanded to the Tribunal for passing a fresh order in accordance with the order dated 23rd June 2009 of this Court in Tax Appeal No.1275 of 2006. The matter is accordingly remanded to the Tribunal with a direction to it to decide the question afresh as above after giving opportunity to both the sides, as directed above. While remitting the matter to the Tribunal as aforesaid, this Court has not expressed any opinion on the merits. The Tribunal shall take up the matter on remand and redecide it within three months from the date of receipt of certified copy of this order. The appeal is allowed in the aforesaid terms.
*mohd sd/ (V.M.Sahai, J.) sd/ (N.V.Anjaria, J.)