COMMISSIONER OF CENTRAL EXCISE Vs. THANGAM STEELS LTD.

JUDGEMENT

(1.) The appellant is the Revenue, aggrieved by the Order of Commissioner (Appeals) dropping a penalty of Rs. 3,33,333.50 which had been imposed on the respondents by the original authority under the 4th proviso to Sub -rule (3) of Rule 96ZO of the Central Excise Rules, 1944. This proviso reads as under : "Provided also that where a manufacturer fails to pay the whole of the amount payable for any month by the 15th day or the last day of such month, as the case may he, he shall be liable to pay : - (i) the outstanding amount of duty along with interest thereon at the rate of eighteen per cent per annum calculated for the period from the 16th day of such month or the 1st day of the next month, as the case may be, till the date of actual payment of the outstanding amount. (ii) a penalty equal to such outstanding amount of duty or five thousands rupees, whichever is greater." There was a delay of 15 days in the payment of duty for the month of March, 2000 by the respondents, who at the material time were working under the Compounded Levy Scheme under Rule 96ZO read with Section 3A of the Central Excise Act. Interest on the duty amount for this period of delay amounting to Rs. 2,466/ - was paid by the assessee. However, the Department proposed to impose a penalty also on them for the above delay in terms of the aforesaid proviso. This proposal was upheld by the original authority, which imposed a penalty equal to duty under the above provision. The first appellate authority vacated this penalty, in the impugned order, after observing that such a disproportionate penalty without any reasoning amounted to abuse of quasi -judicial power. The impugned order took into account the fact that the assessee had paid the duty on 30 -3 -2000, two days prior to the date of receipt of the Commissioner's revised order of 'Annual Capacity of Production' ("ACP" for short). Ld. DR has reiterated the grounds of the Revenue's appeal against this decision of the Commissioner (Appeals). He has also relied on the Allahabad High Court's decision in Pee Aar Steels Pvt. Ltd. v. CCE, Meerut [2004 (170) E.L.T. 406 (All.)], wherein, in relation to a similar penalty on a steel re -roller working under the Compounded Levy Scheme of Rule 96ZP read with Section 3A, it was held that the Tribunal was not competent to reduce the penalty prescribed under the 4th proviso to Rule 96ZP(3). Ld. Counsel for the respondents, relying on the Supreme Court's decision in the State of Madhya Pradesh v. BHEL [1998 (99) E.L.T. 33 (S.C.)], argued that the penalty prescribed under 4th proviso to Rule 96ZO(3) was not mandatory and, therefore, the quasi -judicial authorities had discretion to levy a lesser amount of penalty depending upon the facts and circumstances of the case. Ld. Counsel has also relied on the Tribunal's decision in Silvester Textiles Pvt. Ltd. v. CCE, Mumbai [2001 (129) E.L.T. 119], wherein it was held that no penalty was imposable on the assessee under Rule 96ZQ(5) for a delay of two days in the payment of duty. Reference was also made to the Tribunal's decision in Supertik Industries v. CCE, Bangalore [2002 (147) E.L.T. 993 = 2002 (50) R.L.T. 691], wherein a penalty of Rs. 2.89 lakhs imposed under Rule 96ZP(3) was reduced to Rs. 20,000/ -.

(2.) After examining the case law cited by both sides, I find that none of the cited decisions relates to penalty under Rule 96ZO(3). Ld. DR has argued that the provisions of Rule 96ZO(3) are part materia with those of Rule 96ZP(3) and, therefore, the Allahabad High Court's ruling is applicable to the instant case. On the other hand, ld. Counsel has pleaded for applying the Apex Court's ruling in BHEL's case to the present case. I find that, in the case of BHEL, the Supreme Court was interpreting the expression "shall be liable to pay penalty equal to ten times the amount of entry tax" in Section 7(5) of a Madhya Pradesh Act of 1976. Their Lordships held that such a penalty was not mandatory but only the maximum and that the assessing authority had the discretion to levy a lesser amount of penalty depending upon the facts and circumstances of the case. In the instant case, the corresponding expression used under Rule 96ZO(3) is "shall be liable to pay a penalty equal to such outstanding amount of duty or five thousand rupees, whichever is greater". The legislative intent is clear, which is that the penalty on an assessee like the respondents for delay in payment of duty shall not be less than Rs. 5,000/ - in any circumstance. Applying the Supreme Court's ruling to the case, among the two amounts mentioned in the proviso, the greater one is not mandatory and therefore quasi -judicial authority has the discretion to impose a lesser amount of penalty. This discretion of the quasi -judicial authority lies between Rs. 5,000/ - and the amount of duty. Accordingly, after taking into account the fact that the assessee promptly paid the interest on duty for the period of delay, I am inclined to hold that a penalty of Rs. 5,000/ - would be reasonable.

(3.) The reason stated by the lower appellate authority for vacating the penalty appears to be that the assessee had paid the duty for March, 2000 before he received the Commissioner's revised order of ACP. This does not appear to be a sound reasoning inasmuch as it is an admitted fact in this case that the assessee had been paying duty for the previous period on the basis of their own estimate of ACP and monthly duty liability, which was their claim before the Commissioner and was accepted by him in the revised order of ACP. The assessee could have done the same thing for the month of March, 2000 as well without waiting for the said order. In the circumstances, the delay of payment of duty for March, 2000 cannot be just "explained away" by saying that they received the Commissioner's order upholding their own estimate of ACP and monthly liability only on 1 -4 -2000. Yet another reason stated in the impugned order is that the original authority had imposed penalty equal to duty without stating any reason. The original authority was imposing the maximum penalty, which it felt was mandatory and hence did not require any reasoning. The view taken by that authority, of course, was not correct. But the reasoning of ld. Commissioner for vacating the penalty is also faulty.