COMMNR. OF CENTRAL EXCISE, CHANDIGARH Vs. M/S. STESALIT LTD.
Supreme Court of India (Division Bench (DB)- Two Judge)
Appeal (Civil), 4507 of 2004, Judgment Date: Feb 15, 2017
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL No.4507 OF 2004
The Commissioner of Central
Excise, Chandigarh ….Appellant(s)
VERSUS
M/s Stesalit Limited …Respondent(s)
J U D G M E N T
Abhay Manohar Sapre, J.
1) This appeal is filed against the judgment and final order No.
123/2004-B dated 05.11.2003 passed in Appeal No. E/1122 of 2003-B by the
Customs, Excise and Service Tax Appellate Tribunal, New Delhi whereby the
Tribunal partly allowed the appeal and reduced the amount of penalty from
Rs.2,06,000/- to Rs.50,000/-.
2) We herein set out the facts, in brief, to appreciate the issue
involved in this appeal.
3) The respondent-a Limited Company is engaged in the manufacture of
parts of Railways and Tramways stock classifiable under Chapter 86
including smoothing Reactors falling under Chapter 85.04 of the Schedule to
the Central Excise Tariff Act, 1985. The respondent also undertakes the
activity of modification/up-gradation of old Smoothing Reactors received
from the Railways.
4) During the course of modification, the weight of copper coil in the
old smoothing reactors is increased by adding new copper coil to the
existing old copper coil.
5) It was, however, observed by the authority concerned that the
respondent manufactured copper coils from the copper strips and used them
capatively in the up-gradation of smoothing reactors. The respondent,
however, neither paid any duty on the copper coil used by them capatively
in their modification activity undertaken at the relevant period nor did
they submit the requisite declaration under Rule 173-C of the Central
Excise Rules, 1944(hereinafter referred to as “the Rules”).
6) Since no duty was paid by the respondent on upgraded reactors, they
were not eligible for the benefit of exemption provided vide Notification
No. 67/95-CE dated 16.03.1995. They were, therefore, required to pay duty
on copper coils as an intermediate product which was meant for captive
consumption.
7) This led to issuance of show cause notice dated 17.04.2001 to the
respondent by the adjudicating authority proposing therein the demand of
unpaid duty payable by the respondent on the aforementioned goods and also
penalty. By order dated 25.02.2003, the adjudicating authority confirmed
the demand of duty for Rs.2,05,291/- along with interest under Section 11-
AB of the Central Excise Act, 1944 (hereinafter referred to as “the Act”).
The authority also imposed a penalty of Rs.2,06,000/- under Section 11-AC
of the Act read with Rule 173-Q of the Rules.
8) Felt aggrieved by the aforesaid order, the respondent(assessee) filed
appeal before the Tribunal. The respondent, however, did not challenge the
demand of duty but confined their challenge only to imposition of penalty
and, in particular, its quantum. According to the respondent, having regard
to the totality of the facts and circumstances of the case, at best,
nominal amount of penalty could be levied on the respondent but not the one
imposed.
9) By impugned order dated 05.11.2003, the Tribunal partly allowed the
respondent's appeal and reduced the amount of penalty from Rs.2,06,000/- to
Rs.50,000/-. It is against this order, the Revenue has filed this appeal by
way of special leave before this Court.
10) Heard Mr. K. Radhakrishnan, learned senior counsel for the appellant.
None appeared for the respondent.
11) Mr. Radhakrishnan, learned senior counsel appearing for the
appellant(Revenue) while assailing the legality and correctness of the
impugned order contended that keeping in view the law laid down by this
Court in Union of India & Ors. Vs. Dharamendra Textile Processors & Ors.,
(2008) 13 SCC 369, which unfortunately was not taken note of by the
Tribunal though it has direct bearing over the issue in question, the
impugned order cannot be said to be legally sustainable and is, therefore,
liable to be set aside and that of the adjudicating authority restored.
12) It was his submission that the Tribunal had no jurisdiction to reduce
the quantum of amount of the penalty imposed by the adjudicating authority
on the respondent under Section 11-AC of the Act read with Rule 173-Q of
the Rules in the light of the law laid down in Dharamendra Textile
Processors’s case (supra) and, more so, when in principle, neither the
respondent questioned the grounds for its imposition and nor the Tribunal
found any fault in the imposition. In other words, the submission was that
in the light of the law laid down in the case of Dharamendra Textile
Processors (supra), there was no discretion left with the Tribunal to
reduce the quantum of penalty amount once it held that a case for penalty
is made out.
13) Having heard the learned counsel for the appellant and on perusal of
the record of the case, we are inclined to accept the submission of the
learned counsel for the appellant.
14) As rightly argued by the learned counsel for the appellant, the issue
urged herein was examined by three judge Bench of this Court in Union of
India & Ors. Vs. Dharamendra Textile Processors & Ors.(supra). It was a
reference made to examine the correctness of the two earlier decisions of
this Court rendered in Dilip N. Shroff vs. Joint Commissioner of Income
Tax, Mumbai & Anr., (2007) 6 SCC 329 and Chairman, SEBI vs. Shriram Mutual
Fund & Anr., (2006) 5 SCC 361. Their Lordships examined the issue in detail
and held that the law laid down in the case of Dilip N. Shroff (supra) is
not correct whereas the law laid down in the case of SEBI (supra) is
correct. The following observations of Their Lordships are apposite which
reads as under:
“15. The stand of learned counsel for the assessee is that the absence of
specific reference to mens rea is a case of casus omissus. If the
contention of learned counsel for the assessee is accepted that the use of
the expression “assessee shall be liable” proves the existence of
discretion, it would lead to a very absurd result. In fact in the same
provision there is an expression used i.e. “liability to pay duty”. It can
by no stretch of imagination be said that the adjudicating authority has
even a discretion to levy duty less than what is legally and statutorily
leviable………….”
“19. In Union Budget of 1996-1997, Section 11-AC of the Act was introduced.
It has made the position clear that there is no scope for any discretion.
In Para 136 of the Union Budget reference has been made to the provision
stating that the levy of penalty is a mandatory penalty. In the Notes on
Clauses also the similar indication has been given.
20. Above being the position, the plea that Rules 96-ZQ and 96-ZO have a
concept of discretion inbuilt cannot be sustained. Dilip Shroff case was
not correctly decided but SEBI case has analysed the legal position in the
correct perspectives. The reference is answered……………..”
(emphasis supplied)
15) Applying the aforementioned law to the facts of this case, we are of
the considered opinion that the Tribunal erred in reducing the amount of
penalty from Rs.2,06,000/- to Rs.50,000/-. Indeed, the Tribunal, in our
opinion, failed to take into consideration the law laid down in the case of
Dharamendra Textile Processors (supra) which the Tribunal was bound to
take while deciding the appeal and instead the Tribunal wrongly placed
reliance on its own decision in the case of Escorts JCB Ltd. vs CCE 2000
(118) ELT 650 (Tribunal). We also find that the Tribunal gave no
justifiable legal reasons for reducing the penalty amount.
16) In the light of foregoing discussion, we are unable to concur with
the reasoning and the conclusion arrived at by the Tribunal. They are not
legally sustainable and, therefore, deserve to be set aside.
17) The appeal thus succeeds and is accordingly allowed. Impugned order
is set aside and that of the order passed by the adjudicating authority is
restored. No costs.
……...................................J.
[J. CHELAMESWAR]
….……..................................J.
[ABHAY MANOHAR SAPRE]
New Delhi;
February 15, 2017
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