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TAXAP/289/2009 15/ 15 JUDGMENT
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX
APPEAL No. 289 of 2009
For
Approval and Signature:
HONOURABLE
MR.JUSTICE K.A.PUJ
HONOURABLE
MR.JUSTICE RAJESH H.SHUKLA
=========================================================
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 ?
4
Whether
this case involves a substantial 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 SURAT-I - Appellant(s)
Versus
DARSHAN
PROCESSORS - Opponent(s)
=========================================================
Appearance
:
MR
RJ OZA for
Appellant(s) : 1,
None for Opponent(s) :
1,
=========================================================
CORAM
:
HONOURABLE
MR.JUSTICE K.A.PUJ
and
HONOURABLE
MR.JUSTICE RAJESH H.SHUKLA
Date
: 18/02/2010
ORAL JUDGMENT
(Per : HONOURABLE
MR.JUSTICE K.A.PUJ)
Leave to amend as per the
draft amendment.
The Commissioner of
Central Excise & Customs, Surat-I has filed this tax Appeal
under Section 35G of the Central Excise Act, 1944 proposing to
formulate the following substantial questions of law for
determination and consideration of this Court;
(A)
Whether in the facts and circumstances of the case, the Tribunal is
justified and has committed substantial error of law in reducing
the mandatory penalty imposed under Section 11AC of the Central
Excise Act, 1944 to the extent of 25% of the amount of duty on the
ground that the entire duty amount was deposited before issuance of
show cause notice without satisfaction of first and second proviso
to Section-11AC of the said Act ?
(B)
Whether, in the facts and circumstances of the case, the Tribunal
is justified and has committed substantial error of law in placing
reliance on the decision rendered by the Hon’ble Delhi
High Court in the case of CCE vs. Malbro Appliances
P. Ltd., reported in 2007 (79) RLT 109 (Del)/ 2007(208) ELT 503
(Delhi) & in case of K.P. Pouches P. Ltd., reported in 2008
(85) RLT (483) (Delhi)/ 2008 (228) ELT 31 (Del) ?
(C)
Whether, in the facts and circumstances of the case, the Tribunal
is justified and has committed substantial error of law in not
holding that the penalty leviable under Section 11AC of the Act
equivalent to the amount of duty is mandatory or not and whether
there is discretion conferred in the matter of quantum of penalty
?
Heard Mr. R. J. Oza,
learned Standing Counsel appearing for the Revenue and perused the
order passed by the authorities below.
At the time of hearing of
this Tax Appeal Mr.Oza reframed the substantial questions of law
which are as under :-
(a)
Whether or not benefit of reduced penalty under proviso to Section
11 AC of the Central Excise Act, 1944 can be extended to such
person who has not paid amount of interest determined by the
adjudicating authority payable under Section 11AB of the Central
Excise Act, 1944 ?
(b)
Whether or not benefit of reduced penalty under proviso to Section
11AC of the Central Excise act, 1944 can be extended to such person
who has paid, before issuance of show cause notice only duty
determined by the adjudicating authority payable under Section
11A(2) of the Central Excise Act, 1944?
(c)
Whether the adjudicating authority is statutorily obliged to set
out in his order the availability of benefit of reduced penalty
prescribed under proviso to Section 11AC of the Central Excise Act,
1944 and to give option to such person liable for penalty under
Section 11AC of the Central Excise Act, 1944 ?
(d)
Whether in the facts and circumstances of the case, the Tribunal
is justified and has committed substantial error of law in placing
reliance on the decision rendered by the Hon’ble High Court in the
case of CCE v. Malbro Appliances P. Ltd., reported in 2007 (79) RLT
109 (Del) / 2007 (208) ELT 503 (Delhi) and in case of K.P.Pouches
P. Ltd., reported in 2008 (85) RLT (483) (Delhi)/ 2008(228) ELT 31
(Del)?
(e)
Whether the impugned order made by the Tribunal can be said to be
an order in accordance with law?
(f)
Whether or not in the facts and circumstances of the case the
Tribunal has committed substantial error of law in reducing penalty
to 25% of the duty amount on the respondent ?
Mr.Oza submitted that the
Tribunal has not recorded any reasons setting out facts of the case
of the respondent and has mechanically passed order extending
benefit of reduced penalty on the respondent. He has further
submitted that the team of Central Excise Officers had carried
search of the respondent’s premise on 7.11.2001 and detected evasion
of Central Excise duty payable by the respondent as on the date of
the said search. The respondent having faced with the situation,
deposited sum of Rs.5,15,704/- between 17.11.2001 to 20.6.2002. The
show cause notice was issued on 20.5.2005. The adjudicating
authority has passed order dated 29.3.2006 demanding duty of
Rs.5,15,704/- and also imposed penalty of Rs.2 lacs under Section
11AC of the Central Excise Act, 1944. The appellant preferred Appeal
and the Appellate Commissioner by his order dated 28.9.2007 allowed
the Appeal of the appellant and imposed penalty equivalent to duty
amount on the respondent. The respondent preferred Appeal against
the order of the Appellate Commissioner of enhancement of penalty
and the said Appeal is allowed and penalty imposed on the respondent
is reduced at 25% of the duty by the Tribunal by order dated
19.8.2008.
Mr.Oza has submitted that
the respondent has not complied with the preconditions for availment
of benefit of reduced penalty under proviso to Section 11AC of the
Central Excise Act, 1944 and, therefore, the impugned order of the
Tribunal is liable to be set aside.
Mr.Oza further submitted
that the decision of the Delhi High Court in the case of K. P.
Pouches (P) Ltd., reported in 2008 (228) ELT 31 (Del),
cannot be applied to the case of the
respondent inasmuch as in the case of K.P.
Pouches (P) Ltd., (Supra)
the adjudicating authority has not ordered recovery of interest
under Section 11AB of the Central Excise Act, 1944 because in the
said case the assessee had deposited total amount of duty payable
under Section 11A(2) of the Act on the date of detection of evasion
of duty itself. He has further submitted that the decision in the
case of Malbro Appliances P. Ltd., reported in
2007 (208) ELT 503 (Del),
also cannot be applied because the facts of the case on hand are not
identical to the facts of the case of the assessee in the Malbro
Appliances P. Ltd., (Supra).
On the contrary, in view of settled proposition laid down by the
Punjab and Haryana Court in the case of Machino
Montell (I) Ltd., reported in 2006(4) STR 177 (P & H)
as well as judgments of the Apex Court in the case
of Rajasthan Spinning & Weaving Mills,
reported in 2009(238) ELT 3 (SC), Dharmendra Textile
Processors, reported in 2008 (231) ELT 3 (SC),
and
decisions of the Tribunal in the case of Jawala
Steels Pvt. Ltd., reported in 2009 (238) ELT 694 (Tri Kolkata),
and Ponneri Steel Industries, reported in 2009
(238) ELT 295 (Tri Chennai)
and such other cases, the Tribunal was required to allow department
to levy penalty on the respondent for the amount equivalent to his
duty liability and pass order accordingly.
Mr.Oza
has further submitted that the impugned order of the Tribunal is in
disregard of the law laid down by this Court in Tax Appeal No.140 of
2008 and Special Civil Application No.22931 of 2005 and such other
judgments, which obligate upon the Tribunal to record cogent reasons
in support of conclusion arrived at by him in passing the final
order. In support of this submission
Mr.Oza also relied on the following
decisions (I) Coats Viyella India Ltd., Vs.
Commissioner of Central Excise, 2004 (133) ELT 229 (SC) (ii) TATA
Engineering & Locomotive Co. Ltd., Vs. Collector of Central
Excise, 2006 (203) ELT 360 (SC) (iii) Commissioner of Central Excise
Vs. Wimco Ltd., 2007 (217) ELT 3 (SC) (iv) Commissioner of Central
Exicse Vs. GTC Industries Ltd., 2008 (228) 505 (SC) (v) Commissioner
of Central Excise Vs. Srikumar Agencies 2008 (232) 577 (SC) (vi)
Stead Fast Paper Mills Vs. Collector of Central Excise, 1983 (12)
ELT 744 (Guj.).
We
have considered the submissions made by Mr.Oza and also perused very
minutely the order passed by the authorities below. As a matter of
fact, all these questions reframed by Mr.Oza are different facets of
the main question as to whether the Tribunal is justified in
reducing the penalty to 25% of the
duty leviable on the respondent. All these
aspects of the main question are already considered by this Court in
its order dated 18.11.2009 in the case of Messers
Exotic Associates Vs. Commissioner of Central Excise (Tax Appeal
No.572 of 2007 with Tax Appeal No.869 of 2007 and Tax Appeal No.1942
of 2008, in the case of Commissioner of Central Exicse & Customs
Vs. Rama Synsilk Mills P. Ltd., decided on 21.1.2010.
This Court after considering the decision of Commissioner
of Central Excise Vs. Malbro Appliances, 2007 (79)
RLT 109 (Delhi), Union of India Vs. Dharmendra
Textiles, 2008 (231) ELT 3 (SC), Union of India Vs. Rajasthan
Spinning & Weaving Mills, 2009 (238) ELT 3 (SC), K. P. Pouches
(P) Ltd., Vs. Union of India, 2008 (228) ELT 31 (Delhi),
Commissioner of Central Excise, Rohtak Vs. J. R. Fabrics Pvt. Ltd.,
2009 (238) ELT 209,
has taken the view that the order passed by the Tribunal
retaining the penalty of 25% of the duty
amount seems to be quite justified. For the reasons recorded in the
said two judgments, we do not feel it necessary to take any
different view in this Appeal.
However,
Mr.Oza has made two more submissions in this Tax Appeal. He has
emphatically stated that the respondent has not complied with
pre-condition for availment of benefit of reduced penalty under
proviso to Section 11AC of the Central Excise Act, 1944. As per the
first proviso, the duty amount was not paid with interest and even
the reduced penalty of 25% is not deposited by the respondent within
30 days from the date of such determination, as required under
second proviso to Section 11AC of the Act. So far as second issue
is concerned, Mr.Oza submitted that the adjudicating authority is
not under any statutory obligation to set out in its order the
availability of benefit of reduced
penalty prescribed under proviso to Section
11AC of the Central Excise Act and to give an option to such person
liable for penalty under that Section. Both these issues were dealt
with by this Court in Tax Appeal No.572 of 2007 with tax Appeal
No.869 of 2007 decided on 18.11.2009. It is also important to note
that the adjudicating authority has not calculated the interest
neither in the order-in-original nor even thereafter. It is,
therefore, too much to expect from the respondent assessee to pay
the interest alongwith the duty amount in absence of such
calculation of interest. As far as statutory obligation of the
adjudicating authority is concerned, the Central Excise Department
itself has issued Circular on 22.5.2008 wherein it is clarified that
in all cases wherein penalty under Section 11AC of the Act is
imposed the provisions contained in the first and second proviso of
Section 11AC should be mandatorily mentioned in the
order-in-original
itself by the adjudicating authority.
It is, therefore, not open for the revenue to agitate this issue
before the Court in contradiction of the Circular issued by the
Central Excise Department. This Court in Messers
Exotic Associates (Supra)
has
directed the adjudicating authority to pass a fresh order giving
option to the assessee to pay the duty amount within 30 days by
making it explicitly clear in the order itself that if the assessee
wants to avail such option he is permitted to do so. In the case
on hand since the duty amount has already been paid by the
respondent assessee and if the interest and/or reduced penalty of
25% were not paid by the respondent assessee, the adjudicating
authority may send a communication to the respondent assessee
indicating therein that the particular amount of interest and/or 25%
of the penalty of the duty amount is not paid by the respondent
assessee and hence if the assessee wants to avail
the benefit of the reduced penalty of 25%,
such amount of interest and/or penalty of 25% should be paid within
30 days from the date of receipt of such communication, failing
which they would be liable to pay penalty under Section 11AC
equivalent to the amount of duty.
Before
parting, we observe that the order passed by the Tribunal cannot be
said to be a non-speaking and non-reasoned order. The authorities
cited by Mr.Oza in support of his submission that a non-speaking
order is passed by the Tribunal and hence it deserves to be
dismissed, were duly considered by us and we are of the view that
they are not applicable to the facts of the present case. The
Tribunal while dismissing the Departmental Appeal observed that the
quantum of the penalty is to the extent at around 25% of the duty
amount and does not call for any interference. The Tribunal is
taking consistent
view in the matters of penalty levied
under Section 11AC and when the duty amount is paid before issuance
of show cause notice, the penalty is reduced to 25% of the duty
amount. If the duty amount with interest is not paid in time and
even reduced penalty of 25% of the duty amount is not paid in time
and option is not given to the respondent assessee, we have taken
the view that such option should be given to the assessee and period
of 30 days would commence from the date of giving such option. In
this view of the matter, no interference is called for in the order
of the Tribunal.
Subject to the above
clarification this Tax Appeal stands dismissed.
( K. A. PUJ, J.)
(RAJESH H. SHUKLA, J.)
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