The Kolkata bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) deleted the penalty demanded and held that Rule 96zp of Central Excise Rules, 1944 declared as ultra vires by the Supreme Court.
M/s. Hazra Iron Works, the Appellant is a manufacturer of hot re-rolled products of non-alloy steel falling under Chapter Heading 7214.90 of the Central Excise Tariff Act, 1985. Based on the declaration filed by the Appellant on 28/08/97, the Annual Capacity of Production (ACP)of the Appellant was provisionally fixed as 587.83 MT.
The Appellant submitted Chartered Engineers Certificate based on which the ACP was revised as 1055.435 MT. On joint verification, some differences were observed. Based on the verified parameters, the ACP was finally fixed as 1106.82 MT.
As there was no change in the plant and machinery from Sept 1997 to 12/04/2000, the parameters found in joint verification were declared as correct and accordingly, the Appellant was asked to pay duty as per the final ACP of 1106.82 MT, fixed.
The Appellant did not file any option either to avail of the scheme for payment of duty under Rule 96ZP(1) of the Central Excise Rules, 1944 or the scheme under Rule 96ZP (3) of the Central Excise Rules, 1944 on the introduction of compounded levy scheme under Section 3A of the Central Excise Act, 1944 w.e.f. 01.09.1997.
Since the assessee did not opt for the scheme at the time of introduction of the compounded levy, they were liable to discharge duty in terms of Rule 96ZP(1) of the Central Excise Rules, 1944, till they specifically exercised the option of 96ZP(3).
The Department argued that the Appellant is liable to pay duty in terms of 96ZP(1) for the financial years 1997-98 and 19981999 and at the rate prescribed under 96ZP(3) for the year 1999-2000. Since the Appellant has not paid the duty based on the ACP fixed for the period 01/09/1997 to 31/03/2000, the Appellant was asked to pay a differential duty of Rs 2,94,196, vide the Impugned Order.
A two-member bench comprising Shri P K Choudhary,(Judicial)and Shri K Anpazhakan, (Technical) viewed that the Appellant has not paid the duty as per the ACP fixed by the Commissioner for the years 1997-1998 and 1998-1999. It was contended that they have not opted for payment of duty under 96ZP(3) and hence they are liable to pay duty under Rule 96ZP(1) only.
It was evident that when an assessee claims that their actual production is lower than the ACP determined by the Commissioner, then the Commissioner has to determine the actual production and re-determine the amount of duty payable based on such actual production.
The re-determination must be done by the Commissioner based on the evidence produced by the assessee to show that their actual production is much less than the ACP fixed.
The Appellant has not submitted any evidence before the Commissioner for re-determination of the ACP and fixing of the duty based on actual production.
In the absence of any redetermination done by the Commissioner, the ACP fixed by the Commissioner @ 1106.82 MT per annum remains and the assessee needs to pay duty as per ACP fixed. It was observed that the assessee has paid duty based on actual production and not based on ACP fixed. The CESTAT upheld the demand of duty confirmed in the Impugned Order.
Considering the decision in the case of Shree Bhagwati Steel Rolling Mills v. Commr. Of Central Excise wherein it was held that the provisions of interest and penalty under Rule 96ZP of the Central Excise Rules, 1944 as ultra vires.
The CESTAT held that the demand of interest and penalty in the Impugned Order is not sustainable and set aside the interest and penalty demanded in the said Order.
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