Commissioner of Central Excise Vs. Navyug Corporation and United

1. The department in both these cases has sought for the reference of the point of law to the Jurisdictional High Court for the decision, which is as follows. "Whether penalty is impossible (if duty is paid before issue of SCN) under Rule 173-Q of CER 1994, when any offence committed by wilful mis-statement of suppression of facts or contravention of any of the provisions of Central Excise Act 1994 or of the Rules made there under with intent to evade payment of Central Excise duty, is established and up held by the appellate authority and Rule 173-Q is quite specific for imposition of penalty." 2. The grounds on which the reference is sought are that the respondent availed deemed modvat credit on aluminium ingots and scraps under chapter 76.02 used in the manufacture of Anhydrous aluminium chloride falling under chapter heading 2827.00 produced from different radars which were clearly recognizable as non-duty paid namely Padmavati Metal Industries and M/s. Prakash Metal Works. The reference of these two firms who are the manufacturers it was noticed that they had manufactured and cleared aluminium pat scrap without payment of Central Excise duty and without issue of Central Excise gate passes. The respondent has availed deemed modvat credit on the basis of the invoice of the bills issued by the above firms for the non-duty paid aluminium pad scraps. Show cause notice was issued on 16.12.92 to the respondent calling upon it to show cause the availed modvat deemed credit should not be recovered and penalty imposed. In reply the respondent stated that it is already reversed on 16.04.92. The respondent had not disclosed the full facts while filing modvat declaration and the full facts of non-duty paid character of inputs at the time of filing invoice to the department, amounting to suppression and misdeclaration.

The Collector has confirmed the demand for larger period and imposed the penalty of Rs.20,000 under Rule 173-Q of the Central Excise Rules.

The respondent preferred an appeal against that order in this matter wherein the demand is confirmed and the penalty was set aside as ruling in 1990 (46) ELT 400. When the Tribunal has upheld the applicability of the extended period of limitation on the ground of misdeclaration and suppression of facts the penalty under Rule 173-Q should follow. In E/229/93 the Collector had confirmed the demand under Rule 57-I in Central Excise Rules and imposed penalty of Rs. 5000 under Rule 173-Q.3. Heard the Ld. JDR for the department. The respondent is absent without any representation. Perused the impugned order dated 24.02.93 and 25.02.93 and the orders of the Tribunal and the reference application. From the question raised by the department it is seen that the penalty is imposable under Rule 173-Q of the Central Excise Rules when any offence is committed by wilful misstatement or suppression of facts with an intent to evade payment of duty, even if the duty is paid before the issue of show cause notice. This question arises out of the order of the Tribunal wherein the penalty is imposed relying on 1990 (46) ELT 400 in Dhampur Sugar Mills Ltd. in Order No. 5/98 dated 29.11.89 by the Government of India. In the absence of any contest by the respondent, the matter requires reference as prayed for. Hence the order.

Both the applications are allowed. The registry is directed to make a reference to the Hon'ble High Court of Ahmedabad Under Section 35G(1) of the Central Excise Act along with copy of the orders of the Collector and the Tribunal.