The penalty under Rule 96ZQ is mandatory and no discretion lies with appellate or adjudication officer.

PJ/Case Laws/2010-11/1182

Case: - Commissioner of Central Excise, Mumbai v/s Sunil Silk Mills

Citation: - 2011-TIOL-47-ST-CX.

Issue: - The penalty under Rule 96ZQ is mandatory and no discretion lies with appellate or adjudication officer.

Brief fact: - The Commissioner (Appeal) had imposed penalty of an amount equivalent to duty under Rule 96-ZQ, which is 100% on the assessee. In appeal, the Tribunal exercising the discretion held that it was a case of rule 96ZQ of CER, 1944 and was a case of penalty and exercise its discretion in reduced down the quantum of penalty to Rs one lakh only.

Revenue is in appeal against the judgment passed by the Tribunal.

Appellants Contentions: - Revenue referring to provision of Rule 96ZQ and submitted that the aforesaid provision is mandatory in nature and therefore no discretion could have been exercised by the Tribunal.

Reasoning of Judgement: - The Tribunal perused the provisions of Rule 96-ZQ sub-rule (3) and (5) and held that these provisions give clear indication that if there is any failure to pay the amount of duty by the date specified in sub-rule (3), the assessee is liable to pay penalty equal to an amount of duty outstanding from him at the end of such month or Rs. 5000/-, whichever is greater. The expression "shall" used in the said provision also indicates that such provision is mandatory.

It was held that the same view was taken in the case of Union of India and others v/s Dharmendra Textile Processors and others [(2008) 13 SCC 369] wherein it was held that Rules 96-ZQ and 96-ZO have a concept of discretion inbuilt cannot be sustained.

It was held that in the present case, only the provisions of Rule 97-ZQ were concerned. So far Section 11-AC of the Act is concerned, the scope of the said Section was considered by the Supreme Court in Union of India v. Rajasthan Spinning and Weaving Mills [2009-TIOL-63-SC-CX]. That decision was rendered in the context of the said provision of Section 11-AC. Although, in the said decision reference was made to the decision in Union of India and others v. Dharamendra Textile Processors and others but the facts remain that in the said decision, this Court held that the decision in Dharmendra Textile Processors's case must, therefore, be understood to mean that though the application of Section 11-AC would depend upon the existence or otherwise of the conditions expressly stated in the section, but once the section is applicable in a case, the Authority concerned would have no discretion in quantifying the amount and penalty must be imposed equal to the duty determined under sub-Section (2) of Section 11-A.

It was held that in this case Rule 96-ZQ is directly applicable and therefore, the said judgment was squarely applicable. Impugned order of the Tribunal set aside and order of the Commissioner (Appeal) restored.

Decision: - Appeals allowed accordingly.

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PJ/Case Laws/2010-11/1182

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