SAM TURBO INDUSTRIES LTD. Vs. CCE

JUDGEMENT

(1.) THE appellants are engaged in the manufacture of paper and are availing Cenvat credit on inputs and capital goods. During the period of dispute (2000 -01), they were availing the facility of fortnightly payment of duty. Accordingly, for the first fortnight of a given calendar month, they were liable to pay duty on or before the 20th day of that month. For the second fortnight, they were liable to pay duty on or before the 5th day of the succeeding month. When the appellants committed default of payment of duty the above facility of fortnightly payment was forfeited for a period of 2 months or till the date of payment of duty whichever was later. During the period of forfeiture, they paid duty by way of debit in Cenvat credit. This was objected to by the department. Therefore, in a show -cause notice they asked the party to pay the duty for the said period from PLA. This notice also proposed to impose penalty on the noticee under Rule 25 of the Central Excise Rules, 2002. The appellants complied with a part of the department's demand by paying duty (with interest thereon) from PLA for the above period. "However, in adjudication of the SCN, the original authority imposed a penalty equal to duty Rs. 6,45,117/ - on the assessee under Rule 25 ibid. This penalty was reduced by the first appellate authority to Rs. One lakh. The party is still aggrieved by the reduced penalty. Hence the present appeal.

(2.) LD . counsel for the appellants submits that, under Rule 8 of the Central Excise Rules, 2002, it was open to them to pay duty during the period of forfeiture in any of the modes recognized in law. Debit in Cenvat account was one such mode of payment, which, it is submitted, has been recognized by the Hon'ble Bombay High Court in the case of Lloyds Steel Industries Ltd. v. UOI, . Even otherwise, it is argued, the assessee had no intent to evade payment of duty as evidenced by the factum of their having paid duty through debit in Cenvat account and that, in the absence of such intent, Rule 25 ibid was not to be invoked for imposing penalty on them. In this connection, reliance is placed on a decision of this bench in Aeon's Construction Products Ltd. v. CCE Chennai . Ld. counsel has also pointed out that the relevant duty amount was paid by the assessee before adjudication of their case by the original authority and, therefore, they are entitled to the benefit of the Hon'ble Madras High Court's judgment in CCE Madras v. Jkon Engineering (P) Ltd.,, 2005 (67) RLT 157 (Mad.), wherein one of the referred issues answered by the High Court in favour of the respondents therein was whether this Tribunal was correct in sustaining the order of the Commissioner (Appeals) setting aside the penalty imposed on the party under Section 11AC of the Central Excise Act in a case where duty demanded by the department had been paid before conclusion of adjudication proceedings.

(3.) AFTER giving careful consideration to the submissions, find that/the mandate of Rule 8 of the Central Excise Rules, 2002 was underlined by the High Court in the case of Vidushi Wires Pvt. Ltd.] (supra), wherein it was held in imperative language that the provisions were mandatory and non -compliance therewith would attract penalty. I am of the view that this decision of the High Court is an indication of the gravity of the offence of not complying with the terms of Rule 8 ibid. It would appear that contravention of a mandatory provision of law would attract exemplary penalty. The original authority imposed a penalty of over Rs. 6.4 lakhs on the assessee. Ld. Commissioner (Appeals), in an apparently reasonable exercise of discretion in the matter, reduced this penalty to Rs. 1 lac. I am of the considered view that this is also by itself, exemplary for a quasi -judicial authority. Further, I do not think that a higher appellate authority should sit in judgment over such exercise of discretion.