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TAXAP/589/2009 1/ 9 JUDGMENT
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX
APPEAL No. 589 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-II - Appellant(s)
Versus
MITTAL
TEX O FAB PVT LTD - 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
: 19/02/2010
ORAL
JUDGMENT
(Per
: HONOURABLE MR.JUSTICE K.A.PUJ)
1. Leave
to amend as per the draft amendment.
2. The
Commissioner of Central Excise and Customs, Surat-II has filed this
Tax Appeal under Section 35-G of the Central Excise Act, 1944
proposing to formulate the following substantial questions of law for
determination and consideration of this Court.
(A) Whether
Section 11AC of the Central Excise Act, 1944 inserted by Finance Act,
1996 with intention of imposing mandatory penalty on persons who
evaded payment of tax should be read to contain mens rea as essential
ingredient and whether there is a scope for levying penalty below the
prescribed minimum?
(B) Whether
in the facts and circumstances of the case, the Tribunal has
committed substantial error of law in rejecting appeal of the revenue
?
3. Heard
Mr.R.J. Oza, learned Senior Standing Counsel appearing for the
Revenue and perused the orders passed by the authorities below.
4. At
the time of hearing of Tax Appeal, Mr.Oza has reframed the
substantial questions of law, which are as follows:
(a) 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
not paid amount of interest and penalty determined by the
adjudicating authority within time limit prescribed under 1st
and 2nd proviso to 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 statutory 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)/2007208)ELT 503 (Delhi) and in case of K.P. Pouches P. Ltd.,
reported in 208(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
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 ?
(g) Whether
Section 11AC of the Central Excise Act, 1944 inserted by Finance Act,
1996 with intention of imposing mandatory penalty on persons who
evaded payable of tax should be read to contain mens rea as an
essential ingredient and whether there is a scope for levying penalty
below the prescribed minimum ?
(h) Whether
in the facts and circumstances of the case, the Tribunal has
committed substantial error of law in rejecting appeal of the revenue
and confirming order of the appellate commissioner to reduce penalty
imposed on the respondent from Rs.2,34,487/- – to Rs.75,000/- on the
ground that duty has been paid prior to issue of show cause notice ?
5. Mr.Oza
has submitted that the Tribunal has not recorded any reasons setting
out facts of the respondent and has mechanically passed order
extending benefit of reduced penalty to the respondent. He further
submitted that the team of Central Excise Officers had carried search
of the respondent’s premises on 13.01.1997 and detected evasion of
Central Excise duty payable by the respondent as on the date of the
said search. The show cause notice was issued on 23.11.2000. The
adjudicating authority has passed order dated 28.03.2002 confirming
demand made in the show cause notice and directed recovery of duty of
Rs.2,34,867/- under Section 11A(2) of the Central Excise Act, 1944
and imposed penalty of Rs.2,34,867/- under Rule 173Q(1) of the
Central Excise Rules, 1944 read with Section 11AC of the Central
Excise Act, 1944. The respondent preferred appeal before the
Appellate Commissioner and the Appellate Commissioner by his order
dated 14.09.2006 directed to reduce penalty payable by the respondent
from Rs.2,34,867/- to Rs.75,000/-. Therefore, the appellant filed
appeal before the Tribunal and the Tribunal by its order dated
18.08.2008 dismissed appeal of the appellant by placing reliance on
the decision of the Delhi High Court in case of Malbro Appliances as
well as in the case of M/s.K.P. Pouches (P) Ltd.
6. Mr.Oza
has further submitted that the Appellate Commissioner has passed
order reducing penalty on the basis of contention of the respondent
that the duty has been paid prior to issuance of show cause notice.
However, there is nothing on record to show the date on which the
respondent has made payment of duty. In any case of the matter,
admittedly the respondent has not paid interest and penalty in
compliance with conditions stipulated in 1st and 2nd
proviso to section 11AC of the Central Excise Act, 1944, and
therefore, the impugned order of the Tribunal is liable to be set
aside.
7. 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.
8. 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.).
9. 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.
10. 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
Rs.75,000/- 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 Rs.75,000/- 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 Rs.75,000/- is not paid by
the respondent assessee and hence if the assessee wants to avail the
benefit of Rs.75,000/-, such amount of interest and/or penalty of
Rs.75,000/- 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.
11. 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 of 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 of 25% of the duty amount is
retained. If the duty amount with interest is not paid in time and
even penalty of Rs.75,000/- 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.
12. Subject
to the above clarification this Tax Appeal stands dismissed.
(K.A.Puj,J.)
(Rajesh H. Shukla,J.)
rakesh/
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