Central Excise - Penalty proceedings have to be initiated within five years: HC

CHANDIGARH : THIS appeal has been preferred by the revenue.

The assessee was working under the Compounded Levy Scheme from September 1997 to March 2000 and opted to discharge their liability under Rule 96ZP(3) of the Central Excise Rules, 1944 read with Section 3A of the Act. As per 1944 Rules, where a manufacturer failed to pay the whole of the amount of duty payable for any month by the 10th day of such month, he would be liable to pay the outstanding amount of duty along with interest @ 18% per annum till the date of actual payment of outstanding amount and penalty equal to the amount of duty outstanding. During the course of scrutiny of RT-12 returns of the assessee, it was found that it had failed to discharge its liability of Rs 1,66,407/- for the months from December, 1999 to March 2000 within the prescribed time limit. Accordingly, a show cause notice was issued to the assessee. The adjudicating authority vide order dated 26.2.2009 imposed penalty of Rs 1,66,407/- (i.e. equal amount of the duty liability) under Rule 96ZP(3) of the 1944 Rules read with Section 3A of the Act. Feeling aggrieved, the assessee filed an appeal before the Commissioner (Appeals) who vide order dated 22.3.2010 set aside the imposition of penalty. Against the order dated 22.3.2010, the revenue filed an appeal before the Tribunal. The Tribunal vide order dated 7.6.2013 dismissed the appeal by relying upon the judgment of this Court in CCE Chandigarh v. Hari Concast Limited. According to the appellant, the Special Leave Petition filed against the said judgment is pending in the Hon'ble Apex Court. Hence, the present appeal.

The High Court observed,

A Division Bench of this Court in Commissioner of Central Excise, Chandigarh v. M/s Hari Concast (P) Limited, CEA No.35 of 2007, decided on 20.4.2009, after relying upon judgment of the Apex Court in State of Punjab v. Bhatinda District Cooperative Milk Producers Union Limited, 2007-TIOL-176-SC-CT held as under:-

"It is conceded position that proceedings against the respondent-assessee for imposing
penalty were initiated after the expiry of period of five years. Although there is no statutory period of limitation yet reasonable period of limitation for initiating proceedings is five years. In that regard reliance may be placed on the judgment of Hon'ble the Supreme Court in the case of State of Punjab v. Bhatinda District Cooperative Milk Producers Union Limited,- 2007-TIOL-176-SC-CT."

In so far as judgment in Raghuvar (India) Limited's case (supra) is concerned, therein also, the Apex Court held that any law or stipulation prescribing a period of limitation to do or not to do a thing after the expiry of period so stipulated has the consequence of creation and destruction of rights and, therefore, must be specifically enacted and prescribed therefore. It is not for the Courts to import any specific period of limitation by implication, where there is really none, though Courts may always hold when any such exercise of power had the effect of disturbing rights of a citizen that it should be exercised within a reasonable period. The period of five years has been held to be reasonable period for initiating penalty proceedings. Thus, no advantage can be derived by the revenue from the aforesaid pronouncement.

In view of the above, the Tribunal had rightly upheld the order of Commissioner (Appeals) deleting the penalty on the ground that the proceedings for the same were initiated after 5 years from the relevant date.

Accordingly, no substantial question of law arises. Thus, finding no merit in the appeal, the same is hereby dismissed.