M/S. Sakthi Industries vs Cce, Chennai Ii

(Arising out of Order-in-Appeal No. 140/2013 (M-II) dated 15.4.2013 passed by the Commissioner of Central Excise (Appeals), Chennai)

M/s. Sakthi Industries Appellant

Vs.

CCE, Chennai  II Respondent

Appearance

Shri M.Masilamani, Consultant, for the Appellant Shri B. Balamurugan, AC (AR) for the Respondent

CORAM

Honble Shri D.N. Panda, Judicial Member

Date of Hearing / Decision: 30.09.2015

Final Order No. 41334 / 2015

It is the submission on behalf of the appellant that show-cause notice was issued on 14.12.2000 proposing penalty under Rule 173Q of Central Excise Rules, 1944. Thereafter, one corrigendum was issued on 17.1.2002 proposing penalty under Rule 173GG of Central Excise Rules, 1944. Unfortunately, none of the show-cause notice is available on record. It is only consequence of the show cause notice extracted in the adjudication order dated 15.4.2011. It is also the submission of the appellant that it took 11 years for the adjudicating authority to adjudicate the matter from the date of show-cause notice as stated above. The appellant has suffered undesirable penalty of Rs.1,70,000/- under Rule 173GG of Central Excise Rules, 1944.

2. Revenue supports the adjudication.

3.1 Appellate authority granted relief of penalty under Rule 173Q of Central Excise Rules, 1944 holding that there cannot be simultaneous penalty under Rule 173Q and 173GG. He has failed to show the reason why the penalty under Rule 173GG should be levied. He has also ignored the fact that there was no proposal in the show-cause notice for imposition of penalty under Rule 173GG of Central Excise Rules, 1944. He has also no regard to the law relating to penalty.

3.2 Without foundation in the original show cause notice to levy penalty under Rule 173GG, right to defense cannot be denied. No one can be held deterrently violating the principles of natural justice. The most interesting feature of this appeal is that there was disproportionate penalty of Rs.1,70,000/- for the default of payment of duty of Rs.7,235/-. It is settled principle of law that the object of the rule is certainly to safeguard Revenue, but mens-rea is basic element to judge imposition of penalty to prevent disproportionality taking into the gravity of the breach committed into consideration. Blanket levy of penalty of Rs.1,70,000/- is therefore considered to be disproportionate looking to the gravity of the matter since duty default was Rs.7,235/-. The Honble High Court of Punjab & Haryana has held in para 15 of the judgment in Bansal Alloys & Metals Pvt. Ltd. Vs. Union of India  2010 (260) ELT 343 (P&H) that in the Indian Constitutional scheme power of legislature is circumscribed by fundamental rights. Judicial review of the legislation is permissible on the ground of excessive restriction as against reasonable restriction which is also described as proportionality test. Without mens rea, if penalty is levied that becomes arbitrary and it affects the fundamental rights. Therefore, rule making authority being subordinate to legislation no scope is provided to that authority to prescribe any disproportionate penalty. This ground is alone enough to set aside the penalty imposed.

4. Added to the above, the element of mens rea was also recognized by the Honble Kerala High Court in the case of Superintendent of Central Excise Vs. Sance Pharmaceuticals  2009 (247) ELT 136 (Ker.). In consequence, the appeal is allowed.

5. Since the appeal is disposed on the merit as above, the stay application stands disposed.

(Dictated and pronounced in open court)

(D.N. Panda) Judicial Member Rex

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