Ajay Kumar Mittal, J. - (1.) THIS appeal has been preferred by the assessee under Section 35G of the Central Excise Act, 1944 (in short "the Act") against the order dated 21.9.2010 (Annexure A -5) passed by the Customs, Excise and Service Tax Appellate Tribunal, New Delhi (hereinafter referred to as "the Tribunal") claiming the following substantial questions of law: - - (i) Whether the Tribunal was correct in imposing penalty under Rule 96ZO(3) of an amount equal to the duty liability without considering the reasons and quantum of delay? (ii) Whether the Tribunal was correct in holding that penalty of an equal amount is mandatory under Rule 96ZO(3) and discretion for lesser penalty is not available under the said Rule? The assessee is a manufacturer of Non -alloy Steel Ingots and billets and was to debit an amount at the rate of Rs. 750 per metric ton at the time of clearance of ingots and billets of non -alloy steel from its factory in the account -current maintained by it. In case, the assessee failed to pay the total amount of duty by the due date, it was also liable to pay penalty equal to the outstanding amount of duty or five thousand rupees, whichever was greater. The assessee was issued a show cause notice dated 26.8.2004 (Annexure A -1) for imposing penalty under Rule 96ZO(3) of the Central Excise Rules, 1944 (in short "the Rules") for having failed to discharge duty liability of Rs. 32,50,000/ - within the prescribed time limit. The show cause notice was duly replied. The adjudicating authority vide order dated 24.8.2005 (Annexure A -2) directed for recovery of interest and also imposed the penalty of Rs. 16,75,000/ - under Rule 96ZO(3)(ii) of the Rules. Feeling aggrieved, the assessee filed an appeal before the Commissioner (Appeals) who vide order dated 30.11.2005 (Annexure A -3) accepted the appeal and set aside the order dated 24.8.2005 (Annexure A -2). The revenue had also filed an appeal before the Commissioner (Appeals) against the order of the adjudicating authority levying lesser penalty of Rs. 16,75,000/ - instead of penalty equal to the amount of duty. The said appeal was dismissed on 29.12.2006 (Annexure A -4) by the Commissioner (Appeals). Thereafter, the revenue filed two separate appeals against the order of the Commissioner (Appeals) before the Tribunal who vide order dated 21.9.2010 (Annexure A -5) decided both the appeals by a common order. The Tribunal held that for the period prior to January, 2000, the cheques for the payment had been tendered within the prescribed period but the discrepancy if any is of the late clearances of the cheques by the Bank. Therefore, for the period prior to January 2000 there has been no delay in making the payment of duty as the date on which the cheques has been presented is to be considered as the date of payment and not the date on which the cheque has been encashed. Accordingly, no penalty can be imposed for the period prior to January, 2000. For the period from January, 2000 to March, 2000, the Tribunal has held that there has been a delay in making the payment. The Tribunal, thus, imposed penalty under Rule 96ZO(3) of the Rules for a period of three months, i.e. from January 2000 to March 2000, amounting to Rs. 15,00,000/ - equal to the duty involved. Hence, the present appeal by the assessee.
(2.) LEARNED counsel for the assessee relied upon the decisions of the Gujarat High Court in Krishna Processors v. Union of India : 2012 (280) ELT 186 and that of Himachal Pradesh High Court in Shubh Timb Steel Ltd. v. Union of India : 2012 (286) ELT 495 wherein following the judgment of this Court in Bansal Alloys & Metals (P.) Ltd. v. Union of India : 2010 (260) ELT 343, the issue has been decided in favour of the assessee. On the other hand, learned counsel for the revenue supported the order passed by the Tribunal.
(3.) AFTER hearing learned counsel for the parties, we find merit in the appeal. This Court in Bansal Alloys & Metals (P.) Ltd's case (supra) deciding the question of vires of Rules 96ZO(3), 96ZP and 96ZQ of the Rules held the said provisions to the extent of providing for mandatory minimum penalty without mens rea and without any element of discretion as excessive and unreasonable restriction on fundamental rights being arbitrary and were accordingly declared to be ultra vires the Act and the Constitution. It was recorded as under: - - 15. Applying the above principles to the present situation, the provision for minimum mandatory penalty equal to the amount of duty even for slightest bona fide delay without any element of discretion is beyond the purpose of legislation. The object of the rule is to safeguard the revenue against loss, if any. The penalty has been provided in addition to interest. Mere fact that without mens rea, an can be punished or a penalty could be imposed is not a blanket power without providing for any justification. In the Indian Constitutional scheme, power of legislature is circumscribed by fundamental rights. Judicial review of legislation is permissible on the ground of excessive restriction as against reasonable restriction which is also described as proportionality test. Conclusion 16. For the above reasons, we hold that the impugned provision to the extent of providing for mandatory minimum penalty without any mens rea and without any element of discretion is excessive and unreasonable restriction on fundamental rights and is arbitrary. Moreover, exercise of such power by way of subordinate legislation is not permissible when rule making authority for levying penalty is limited to default "with intent to evade duty. 17. The writ petitions of the assessees are allowed and impugned provisions in Rules 96(ZO), (ZP) and (ZQ) permitting minimum penalty for delay in payment, without any discretion and without having regard to extent and circumstances for delay are held to be ultra vires the Act and the Constitution. In CWP No. 8555 of 2010, penalty has been sustained by the Tribunal to the extent of 100% which will stand quashed without prejudice to any fresh order being passed in accordance with law. It is made clear that if penalty has attained finality as in CWP No. 18099 of 2009 up to this Court, this order will not affect the finality of such order. The appeals filed by the revenue against the orders of the Tribunal sustaining penalty proportionate to the default will stand dismissed.;