1.1 These applications and appeal and cross objection were heard and are being disposed by this common order.
1.2 Appellants are an assessee under Central Excise Act, 1944 and were liable to discharge duty under the provisions of Section 3A of the Act, based on capacity of the furnaces so used. The proper officer determined the capacity and intimated the same to the appellants who did not protest or filed any appeal against the said letter of intimation of the capacity determined. Consequent demands were worked out and confirmed. Hence these appeals by the assessee against the said amounts, now demanded with penalty and interest under the provisions of rule 96ZO(3) ; also a belated appeal against the letter of determination of capacity, with application for condonation of delay; an application of additional grounds is also filed. Revenue has filed cross objection in appeal no E/3461/03 on demands made. Appeal E/252/05 is against the capacity determination.
2.1 After hearing both sides and considering the submission it is found - a) Non-challenge to letter dt 3.11.99 is not fatal to appeal No. E/3461/03 a plea taken by the appellant has force. Such a letter is not an appealable order is well settled ; in fact, it has been held by this Tribunal that appeals against such letters are not maintainable, and when filed they are being held so with directions to obtain an appealable speaking order and thereafter pursue, an appeal, if required. What is appealable to the Tribunal is an order passed by Commissioner "as an adjudicating authority" as per section 35B(1)(a). The appellants were repeatedly requesting the Commissioner with representation as regards the capacity.
Commissioner should have heard them and thereafter issued an appealable order. We would therefore grant the condonation of delay in this case. Application is allowed.
b) The additional material is in nature of legal points. Application made therefore is allowed.
c) The determination of "annual capacity" under the provision of rule 96ZO(3) , basis for the payments are based on installed capacity and not on 'annual capacity determined,' is therefore redundant is a plea made which is to be upheld as - ii) Under Rule 96ZO(1) , an amount @ Rs. 750/- per MT is payable at the time of clearance from factory. Such amount is to be finally adjusted against duty payable for "annual capacity of production" determined. Hence if demand is raised under Rule 96ZO(1), then determination of " annual capacity of production' assumes significance.
iii) The demand in the present case has been raised under Rule 96ZO(3) which stipulates a lumpsum amounts to be paid per month depending upon capacity of 'installed' furnace and no determined capacity.
iv) It is therefore clear that "annual capacity of production" determination has no relevance for compliance under Rule 96ZO(3).
Hence non-challenge to letter dated 03.11.1999 is not fatal in this case since demand has been raised under Rule 96ZO(3) and not under Rule 96ZO(1).
d) The appellants have contested the initiation & continuation of proceedings , under rule 96ZO(3) , as arrived, on Grounds of omission of Section 3A & rule 96ZO. Considering the submissions, it is to be held - i) The common law rule is that if an Act expired or was repealed it was regarded in absence of provision to the contrary, as having never existed, except as to matters and transactions past and closed. Refer "Craies on Statute Law"- pages 351-354 & "Maxwell on The Interpretation of Statutes".
ii) With a view to avoid such an effect, savings clause to be enacted is necessary.
iii) Section 3A of the Central Excise Act, 1944 has been Omitted vide Section 121 of the Finance Act , 2001 , with effect from May 11, 2001. There is no saving clause provided in Section 121 or any other section of the Finance Act, 2001.
iv) It has been settled by following two judgements of Constitution Bench of Supreme Court that Section 6 of the General Clauses Act, 1897 does not apply to a case of "omission".P) Ltd v. Director of Enforcement, New Delhi The above two judgements have been followed by Supreme Court in General Finance Co. Ltd v. Asst. CIT - .
v) It is true that Section 6 of the General Clauses Act, 1987 applies to Central Acts only. The portion of the judgement of the Supreme Court in Rayala Corporation holding that Section 6 does not apply to Rules, etc is really not relevant for the purpose of the present case. Only the portion of the judgement of the Supreme Cout in Rayala Corporation which states that Section 6 does not apply to 'omission' is rightly relied upon by the appellants in the present case to assist the plea.
vi) Section 38A of the Central Excise Act, 1944 is also not applicable in this case, since it does not deal with "section". It deals only with "rules", "notification" or "order".
vii) Hence in absence of any saving clause in Section 121 or any other Section of the Finance Act, 2001 or in the Central Excise Act, 1944 , the pending proceedings cannot be continued. All show cause notice issued under Section 3A which are pending for assessment after 11.5.2001 the date of omission could not be therefore be proceeded with much less adjudicated. Therefore the Order-in-Original needs to be set aside in its entirety.
viii) The substantive mother provision for Rule 96ZO is undoubtedly Section 3A. Thus Section 3A was omitted w.e.f 11.5.2001 by Finance Act, 2001. Vide Notification no 24/97 - CE ( NT) dated 25.7.1997, the Central Government framed Induction Furnace Annual Capacity Determination Rules, 1997 ( hereafter referred as 1997 Rules ) in exercise of powers conferred by Section 3A(2) of the Central Excise Act, 1944. Notification No. 16/200 -CE(NT) dated 1.3.2000 rescinded Notification No. 24/97-CE(NT) dt 25.7.1997. Vide Notification No. 6/2001 -CE(NT) dated 1.3.2001, the Central Government made the Central Excise (Amendment ) Rules, 2001. Rule 7 of these Rules, inter alia, omitted Rule 96ZO. In other words, the 1997 Rules and Rule 96ZO were abrogated even before Section 3A was 'omitted'.
However such prior abrogation of sub-ordinate legislation is not material is a plea, to be upheld. Suppose the 1997 Rules and Rule 96ZO were never abrogated i.e they continued to be present in the law books. Now the question to be asked is whether the present proceedings can be continued and demand is maintainable under Rule 96ZO, after the omission of Section 3A. The answer would be on omission of parent provision ( Section 3A), the subordinate legislation ( Rule 96ZO and 1997 Rules ) relatable to the parent provision, cease to have any legal validity because the source of power ( namely Section 3A) is itself obliterated.
ix) The above view & finding is fully supported by the decision of Supreme Court in Air India v. UOI - , wherein the Supreme Court held that once a parent statute is repealed, the sub-ordinate legislation no longer survives. The Supreme Court held that - "if sub-ordinate legislation is to survive the repeal of its parent statute, the repealing statute must say in so many words and by mentioning the title of the sub-ordinate legislation".
In the present case, the repealing Act, i.e Finance Act, 2001 do not contain any specific provision saving the sub-ordinate legislation i.e rule 96ZO which in any case was omitted with effect from 1.03.2001. The in-built saving clause, in Notification No. 6/2001 -CE(NT) dated 1.3.2001 can not come to the rescue of the Revenue.
That saving clause would be relevant only when the mother provision , namely Section 3A , was alive and in force. The Supreme Court has specifically held that the sub-ordinate legislation cannot survive beyond the life of the mother provision. The position would be no better where the sub-ordinate legislation is omitted prior to the mother provision with a saving clause. Rule 96ZO therefore will not survive beyond 11.5.2001, the date of omission by Section 3A. x) Hence the present proceedings cannot survive and hence the impugned Order-in-Original with all consequent liabilities is liable to be set aside.
e) The plea on interest provision on a taxing statute to be a substantive provision, is a plea to be upheld in view of the Constitutional Bench of Supreme Court decision in case of VVS Sugars v. Govt of APIndia Carbon Ltd v. State of Assam has held after analysing the Cosntitution Bench judgement in J.K. Synthetics Ltd v. CTD that interest can be levied and charged on delayed payment of tax only if the statute that levies and charges the tax makes a substantive provision in this behalf...." and after perusal of section 37(1) Central Excise Act, 1944, which is only a general rule making power conferred cannot be read and relied to upon to uphold the delegated ' interest clause in rule 96ZO(3)' as pleaded by Ld Dr. The decision of the Supreme Court in Kunj Behari Lal and Ors v. State of H.P- wherein it was held as - "14. We are also of the opinion that a delegated power to legislate by making ruled "for carrying out the purpose of the Act" is a general delegation without laying down any guidelines; it cannot be so disabilities nor contemplated by the provisions of the Act itself" And More so, when we find that section 37(2) of the Central Excise Act 1944 was specifically amended to bring in penalty & interest provisions on Modvat Credits when Clause XVIC was inserted in Section 37(2) vide amendment by Finance Act, 1995 & notification 25/95 CE(NT) dt 31.5.95 then issued or clause 1 (bb) added vide Finance Act 1999 to bring in interest under rule 9B. Therefore, amendment of Section 37(2) was imperative to empower delegated legislation on interest levy under rule 96ZO(3). It has to be held that there is no provision for delegated legislation on power to levy interest rules to be framed under the Central Excise Act, 1944 to enact in the Rules, to be framed to implement a scheme of levy under Section 3A. Thus for delay in payment and levy /charge of interest on period of such delay, as enacted in the rule 96ZO is not found to be supported by or could be shown to be derived from any power under the Act, The proviso of rule 96ZO(3) providing for interest in ultra vires the delegated power of rule making granted under the Act.
f) Similarly, examining the plea on penalty provisions, under rule 9620(3) it is found - i) It is axomatic that penalty is a substantive and fiscal liability and can be legislated only by plenary legislation, namely by Parliament or State Legislature, as the case may be.
ii) In addition, in the present case, there is no provision, express or implied, in the Central Excise Act, enabling the rule making authority namely the Central Government to frame the rules to implant a Scheme under Section 3A of the Act as contained in Rule 96ZO(3) relating to levy of penalty , for delay in payments.
iii) Section 37(1) of the Central Excise Act 1944 enables Central Government to frame rules to carry into effect the purposes of the Act. It is settled law that this general power of delegation cannot confer power on the delegated authority to make rules for imposing penalty. This situation is directly covered by the decision of Orissa High Court in Gaffar Kasam v. CST , Orissa - 1974 ( 33 ) STC 98 (SC). In that case, under Rule 16 (2) of the Central Sales Tax ( Orissa ) Rules, penalty was imposed for non-payment of tax demanded.
It was contended by the petitioner that the State Government of Orissa had no authority to make a rule providing for imposition of penalty because there was not provision in the Central Sales Tax Act, 1956 authorising such a rule to be made. Revenue relied upon Section 13 (3) of the Central Sales Tax Act, 1956 which conferred power on the State Government to make rules, not inconsistent with the provisions of this Act and the rules made under sub-section (1) , to carry out the purposes of the Central Sales Tax Act, 1956. The High Court rejected the Revenue's contention and held that "unless the statute expressly authorizes the Rules to create a penal liability , the rule-making authority would have no jurisdiction to create a penal liability". The High Court relied upon the following judgements for reaching to above conclusion :Guldas Narasappa Thimmiah Oil Mills v. CCE 1970 ( 25 ) STC 489 ( Mys) c) Hurdatroy Jute Mills v. Superintendent of Commerical Taxes 1972 ( 30 ) STC 151 ( Pat ) v) The power under Section 37(3) of the Central Excise Act 1944 is already exhausted by the Central Government by enacting Central Excise Rules, 1944 and hence cannot be a source relevant for enacting penalty under Rule 96ZO(3) vi) The provision of clause (b) and clause (c) of sub-section 4 of Section 37 of Central Excise Act, 1944 are not relevant for sustaining the penal provisions contained in Rule 96ZO(3). This is because condition precedent for applying penal provisions contained in Rule 96ZO(3) has nothing to do with the two circumstances mentioned in Section 37(4)(b) and Section 37(4)(c) of Central Excise Act 1944.
vii) The power under Section 37(5) of Central Excise Act , 1944 has been exercised by enacting Rule 209A of the Central Excise Rules, 1944. In any event, this Section 37(5) cannot be relied to sustain the penal provisions contained in Rule 96ZO(3). A plain reading of the Section 37(5) establishes this. Firstly, this Section 37(5) would apply to persons, other than the manufacturers. Secondly, Rule 96ZO(3) does not provide for confiscation if monthly payment as required under Rule 96ZO(3), is not made. Therefore, this Section 37(5) is not relevant at all for judging the source of legislating of penal provisions contained in Rule 96ZO(3).
Therefore, we find no delegation of powers, to make a provision for penalty in rule 96ZO(3) the same as notified is to be held as ultra-vires the power delegated to frame rules under the Central Excise Act, 1944.
g) Once we find that the provision of rule 96ZO(3) as regard interest & penalty are ultra-vires, the delegated powers conferred under the Act, the same are required to be struckdown by denying the powers to do so. The powers to be hold ultra vires and strike down provision of delegated rules is derived on a reading of the Supreme Court decision in case of Chandra Kumar v. UOI 1997 (92 ) ELT 319 SC, para 26,88,91 &97 thereof, and the position settled therein, that this Tribunal is constituted under Article 323B of the Constitution.
h) Proceedings under a provision being strike down as ultra-vires cannot be upheld.3. In view of the findings arrived, we find that the amounts as determined on the cannot be upheld for recovery; appeal No. E/3461/03 is to be followed. Appeal no E/252/05 consequently infructuous & disposed accordingly.