Judgment:
1. After hearing the parties on the stay application, we have decided to take up the appeal.
2. The appellant was a rerolling mill, and had an induct on furnace, and was required to pay duty every fortnight based on the capacity of its production as determined by the rules made in this behalf. The notice issued to it alleged that duty had not been paid for the period from April 1998 to August 1998 and also proposed penalty. The manufacturer contended in reply that it had sought abatement for considerable part of the period, admitted its liability to duty for the remaining period. The Deputy Commissioner found that the assessee had not com,plied with the conditions contained in Sub-rule 2(e) of Rule 96ZO with regard to various parts and held that the appellant was not available. He therefore confirmed the demand for entire duty and imposed penalty. The assessee appealed this order. The Commissioner (Appeals) was of the view that the entire information as prescribed in Sub-rule (2) of Rule 96ZO had been furnished by the assessee and this was no reason for denial of the claim for abatement. He said that wherever the factory was closed for the period not less than 15 days, there was no requirement in terms of a circular issued by the Board, for payment of duty in advance, and set aside the duty. He found that the period from 1.9.1998 to 13.9.1998 being less than 15 days was not covered by the contents of the Board's circular and payment of duty was required to be made. Since this was not done, he reduced the penalty.
He however did not demand for duty for this period, and set aside the entire demand for duty. The appeal is against the order imposing penalty.
3. It will be evident from the narration above that the Commissioner's order contradicts itself. If the reason for imposition of penalty was that, notwithstanding that the assessee was entitled to the abatement it should have deposited the duty in advance, the demand for duty for this period would have to be confirmed; the assessee had not paid the duty and such duty was unpaid when the Commissioner (Appeals) passed the order. By not confirming the demand for duty, the Commissioner in effect accepts that the duty was not required to be paid in advance. If that is so, there would ten be no case for imposition of penalty on the ground that the assessee had not paid the duty which was required to be paid. On this ground alone, the Commissioner (Appeal)'s order would have to be set aside.
4. We also find other grounds for doing so. In its decision in Karmayogi Dyeing Pvt. Ltd. v. CCE 2001(136) ELT 639, the Tribunal was concerned with the identical question, the liability of an assessee to pay duty in advance for a period for which abatement was available, in respect of a processor of textile fabrics, to whom the provisions of Rule 96ZQ apply. The Tribunal noted that neither Sub-section (3) of Section 3A of the Act, which provides the authority for claiming abatement, nor Sub-rule (7) of Rule 96ZQ which deals with the same issue, required payment of duty in advance in cases where abatement is available. It noted the contents of the circular No. 485/51/99 dated 15.9.1999 of the Board, that abatement should be granted in cases where no goods have been produced for not less than seven days, without asking the manufacturer to pay duty first, and if he has already paid duty, it should be reimbursed. It therefore concluded that in cases where the processor did not produce any goods for the period not less than seven days, there was no requirement for him to pay duty in advance.
5. Sub-rule (2) of Rule 96ZO is identically worded as Sub-rule (7) of Rule 96ZQ. The provisions of Section 3A of the Act governed the levy in both cases. The reasoning that was advanced in that decision therefore would apply here. The departmental representative however points out that the Board has prescribed different criteria wit regard to claiming of abatement by induction furnace. In its circular No. 331/47/97-CX dated 30.8.1997 explaining the modification made it to the schemes for levy under Section 3A of the Act, it said in paragraph (e), "If an induction furnace unit operating under Section 3A is continuously closed for not less than 15 days, the pre-payment of duty for the closure period is not to be insisted upon provided the unit has fulfilled all the conditions stated in Sub-rule 2 of Rule 96ZO." He contends that since in the present case the period involved is less than 15 days, pre-payment cannot be permitted.
6. As we have noted, neither Section 3A nor Rule 96ZO(2) or Rule 96ZQ(7) specify either that duty is not required to be paid then abatement is claimed or tat must be deposited in advance. The circular of the Board dealing with textile processor has advanced reasoning in support of its view that such a processor will not be required to pay duty in advance. It pointed out tat as long as the pre-requisite specified in the rule for claim of abatement was specified, the processor is eligible for abatement. "It would be appropriate therefore that where an independent processor is eligible for abatement, it should be granted to him whether he has paid the duty first or did not pay duty in anticipation of obtaining order of abatement. Thus Rule 96ZQ did not contain any specific provision in this regard, there was no specific provision to deny it either." The underlying reason appears to be where the manufacturer has specified the conditions for claim of abatement, there is no point in asking him to pay duty which would in any case only be refunded to him. This reason which should apply with equal force to the induction furnace that we are concerned with.
7. No doubt, as the departmental representative points out that Sub-rule (7) of Rule 96ZQ was amended with effect from 28.2.1999 to provide that where the abatement was for less than a month, the manufacturer or a processor was required to pay duty. There are two answers to this; the first is that the period wit which we are concerned is prior to 28.2.1999 and that second at that no time did Rule 96ZO contain any such provision. We are therefore of the view that there was no justification for the denial of abatement.