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TAXAP/314/2009 13/ 15 JUDGMENT
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX
APPEAL No. 314 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 - Appellant(s)
Versus
PUSHPANJALI
DYEING & PRINTING MILL P 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
: 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;
(i)
Whether in the facts and circumstances of the
case, the Tribunal is justified and has committed a substantial
error of law in confirming/reducing the mandatory penalty imposed
under Rule-25 of the Central Excise Rules, 2002 read with
Section-11AC of the Central Excise Act, 1944 on the ground that the
confirmed duty was deposited before issuance of the show cause
notice?
(ii)
Whether in the facts and circumstances of the present case, the
Tribunal is justified and has committed a substantial error of law
in setting aside the penalty imposed upon the Director of the
respondent under Rule-26 of the Central Excise
Rules, 2002 ?
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 21.07.2001 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.2,24,584/- on 23.7.2001. The show
cause notice was issued on 9.5.2005. The adjudicating authority has
passed order dated 22.3.2006 demanding duty of Rs.2,24,584/- and to
recover interest at the appropriate rate on the delayed short
payment under Section-11AB of the Central Excise Act, 1944 and
imposed penalty of Rs.56,000/- under Rule-25 of the Central Excise
Rules on the respondent. The appellant preferred Appeal against the
order of imposition of reduced penalty and the Appellate
Commissioner by order dated 16.7.2007 allowed Appeal of the
department. Therefore, the respondent filed Appeal before the
Tribunal and Tribunal by its order dated 11.6.2008 reduced the
penalty to the extent of 25% of duty amount.
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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