In the High Court for the States of Punjab and Haryana at Chandigarh … CEA No.100 of 2007 Date of decision:31.1.2008 The Commissioner of Central Excise Commissionerate Rohtak ..Appellant Versus Shri S.K.Gupta, Director of M/s S.K.& Co.(P) Ltd. .. Respondent Coram: Hon’ble Mr.Justice Satish Kumar Mittal Hon'ble Mr.Justice Rakesh Kumar Garg Present: Mr.Sanjiv Kaushik, Advocate for the appellant-revenue. .. Rakesh Kumar Garg,J 1. The present appeal has been filed by the Commissioner of Central Excise Commissionerate, Rohtak under Section 35 G of the Central Excise Act, 1944 against the order dated 28.3.2006 (Annexure P-2) passed by the Customs, Excise & Service Tax Appellate Tribunal, New Delhi in Appeal No.E/2032 of 2004 by proposing the following substantial questions of law: - “ Whether the penalty under Section 11 A C of Central Excise Act, 1944 read with Rule 173 Q of erstwhile Central Excise Rules, 1944 is mandatory and equal to the duty demanded or the authority has discretion to impose lesser penalty?” 2. The brief facts of the case are that M/s Aravali India Ltd., formerly known as Aravali Pipes Ltd., 5 Km. Stone, Hissar Road, Hansi(hereinafter referred to as the 'party' or M/s AIL')are engaged in the manufacture of PVC Pipes falling under chapter heading No.39 of the CETA, 1985 and are also availing Modvat credit on the inputs used in the manufacture of final products. 3. On 9.1.1999 based on intelligence the Central Excise Officers of Hqrs. Anti-Evasion Branch, Gurgaon visited the factory of M/s Aravali India Ltd. for surprise preventive checks. The investigation made by the department crystallized into the show cause notice dated 10.5.2001 issued to the company including the respondent for wrongful availing of Modvat credit to the tune of Rs.86,87,465/-.The case against M/s Aravali India Ltd. was that they have received PVC resin invoices which contained false description of transporting vehicles, which on inquiry was found to be Scooter, Motorcycle, tractor, car, tanker etc. which were not capable of carrying them in bulk quantity. Thus the allegation therefore, was that the goods were not really carried to the premises of respondent from the premises of the consignee/stockists for M/s I.P.C.L. Baroda. Thus it was alleged that M/s Aravali India Ltd. in connivance with the consignment stockists were causing heavy loss to the exchequer. The adjudicating authority vide its order dated 9.2.2004 ordered as under:- “ i) I order recovery of modvat credit of Rs.86,87,465/- from M/s AIL, Hansi under Rule 57-I of erstwhile Central Excise Rules, 1944 read with proviso to Section 11A(1) of Central Excise Act, 1944 by invoking extended period of five years; ii) I order recovery of interest at the appropriate rate on wrongly availed Modvat credit or Rs.86,87,465/- from the party under Section 11 AB of Central Excise Act,1944; iii) I impose a penalty of Rs.86,87,465/- equal to the modvat credit availed fraudulently on M/s Aravali India Ltd., Hansi under Rule 173 Q of erstwhile Central Excise Rules, 1944 read with Section 11 AC of the Central Excise Act, 1944; iv) I impose a penalty of Rs.86,87,465/- on M/s S.K. & Co. Pvt. Ltd., Gurgaon under Rule 173 Q of erstwhile Central Excise Rules, 1944 read with Section 11 AC of the Central Excise Act, 1944; v) I impose a penalty of Rs. 20,00,000/- (Rupees Twenty lacs only) on Sh. Vinod Kumar Bansal, Director-cum-Chairman of M/s Aravali India Ltd. Hansi under Rule 209A of erstwhile Central Excise Rules,1944; vi) I impose a penalty of Rs.10,00,000/-(Rs. Ten Lacs only) on Sh. S.K.Gupta, Director of M/s S.K.& Co. Pvt.Ltd., Gurgaon under Rule 209A of erstwhile Central Excise Rules,1944; vii) I impose a penalty of Rs.10,00,000/- (Rs. Ten Lacs only) on Sh. Anil Kumar Goyal, Partner of M/s Rohan Roadways, 7305, Aram Nagar, Paharganj, New Delhi under Rule 209A of erstwhile Central Excise Rules, 1944.” 4. Against the order dated 9.2.2004 passed by the Commissioner (Appeals) Central Excise, Hissar Appeal No.E/2140/04 was filed by Shri Anil Kumar Goel, partner of M/s Rohan Roadways. Two other appeals,i.e., Appeal No. E/2031/04 and E/2032/2004 were also filed by M/s S.K. & Co. Pvt. Ltd. i.e., consignment stockists and the respondent/assessee(Managing Director of M/s S.K. & Co.) in his individual capacity. The Tribunal vide impugned order dated 28.3.2006 dismissed Appeal No.E/2140/04 filed by Shri Anil Kumar Goel, partner of M/s Rohan Roadways, reduced the penalty imposed by the authority below against M/s S.K.& Co. Pvt. Ltd., Gurgaon in Appeal No.E/2031/04 and allowed the appeal No. E/2032/04 filed by the respondent/assessee and deleted the penalty of Rs.10 lacs imposed upon him under Rule 209 A of the erstwhile Central Excise Rules, 1944. The present appeal has been filed by the Revenue against the order of the Tribunal dated 28.3.2006 passed in Appeal No.E/2032/04 in the case of respondent/assessee. 5. The question of law as raised by the learned counsel for the appellant is misconceived. The question of law sought to be raised by the appellant does not arise in the facts and circumstances of the case. CEA No.96 of 2007 titled as Commissioner of Central Excise Commissionerate Versus M/s S.K. & Co. (Pvt.) Ltd. against the order of the Tribunal passed in E/2031/04 has been admitted and is pending before this Court on a question of law similar to the proposed questions of law as in this appeal. The question proposed to be raised by the Revenue does not arise in the case of the respondent/assessee upon whom penalty was imposed under Rule 209 A of the erstwhile Central Excise Rules, 1944. Even otherwise, the Tribunal has given a finding of fact that the investigation has not brought out any evidence of mens rea against the role played by the respondent in his individual capacity. Neither any finding has been recorded against the respondent/assessee of any fraud, willful misstatement, suppression of fact and collusion to evade the tax. Thus there was no mens rea present in the case of the respondent/assessee. The question whether there was an attempt to evade tax or not is a finding of fact. The concept of penalty has been considered by the Apex Court in several decisions including that of M/s Hindustan Steel Ltd. Versus State of Orissa- AIR 1970(SC) 253. An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute. Moreover a perusal of the grounds of appeal in the present case would show that the Revenue has not at all challenged the finding of fact given by the Tribunal against the assessee. The question sought to be raised does not arise against the respondent/assessee in the facts and circumstances of the case. Thus, we find no infirmity in the orders of the Tribunal and therefore, the appeal is dismissed. (RAKESH KUMAR GARG) JUDGE January 31 ,2008 (SATISH KUMAR MITTAL) nk JUDGE