IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE T.R.RAMACHANDRAN NAIR THURSDAY, THE 17TH JANUARY 2008 / 27TH POUSHA 1929 C.E.Appeal.No. 12 of 2005() --------------------------- O.NO..1186/2002 of CUSTOMS,EXCISE&SERVICE TAX APP.TRIBUNAL,BANGALORE .................... APPELLANT/RESPONDENT:- ---------------------------------------- THE COMMISSIONER OF CENTRAL EXCISE, COCHIN COMMISSIONERATE, C.R.BUILDING, I.S.PRESS ROAD, COCHIN. BY ADV. SRI.P.PARAMESWARAN NAIR,ASST.SOLICITOR RESPONDENTS: APPELLANT:- ------------------------------------------ M/S.COCHIN POLY PACK (P) LTD., CHITOOR, PUTHUPARIYARAM P.O., THODUPUZHA, KERALA. BY ADV. SRI.G.SUBRAMANIAN SRI.S.SHYAM THIS CENTRAL EXICISE APPEAL HAVING BEEN FINALLY HEARD ON 17/01/2008, THE COURT ON THE SAME DAY PASSED THE FOLLOWING: C.N.RAMACHANDRAN NAIR & T.R.RAMACHANDRAN NAIR, JJ. ========================= C.E.Appeal No. 12 of 2005. ========================= Dated this the 17th day of January, 2008. C.N.Ramachandran Nair, J. J U D G M E N T Heard the Assistant Solicitor General appearing for the appellant and the counsel appearing for the respondent. The respondent failed to explain shortage of raw materials noticed by the department. Consequently department assumed that the party could not have accounted production and clearances, and therefore penalty was proposed under Section 11AC of the Central Excise Act read with Rule 173Q of the Central Excise Rules. The Deputy Commissioner gave up the proposal to levy of penalty under Rule 173Q but levied penalty under Section 11AC. The Commissioner of Customs and Central Excise (Appeals) found that proceedings under Sec.11AC is not maintainable as the provision was introduced subsequent to the relevant period and therefore he cancelled the penalty levied under that Section. However, he noticed that the respondent is liable to be levied C.E.Appeal No. 12 of 2005. 2 penalty under Rule 173Q. However, penalty was levied without issuing notice and without hearing the appellant. In view of the procedural impropriety and in the absence of a departmental appeal against the original order, the Tribunal cancelled the penalty. Counsel for the appellant contended that since there is only a procedural irregularity, the Tribunal should have remitted the matter back to the Commissioner (Appeals), if not to the Deputy Commissioner himself. Counsel for the respondent, on the other hand, contended that the order of the Commissioner (Appeals) is a nullity because of his failure to give an opportunity before adverse orders are issued against the respondent. We find that the first appellate authority namely Commissioner (Appeals) has the power to enhance the levy of penalty. It is not in dispute that along with proposal for imposing penalty under Sec.11AC, there was a proposal to levy of penalty under Rule 173Q also. When the Commissioner (Appeals) found that Section 11AC has no application as the Section was introduced subsequent to the impugned action, the proper procedure would have been to cancel the penalty so levied and to remit the matter back to the Deputy Commissioner for considering the penalty under Rule 173Q. We find that the Tribunal C.E.Appeal No. 12 of 2005. 3 has also not exonerated respondent from liability. In the circumstances, we feel, the Tribunal should have remanded the matter after allowing the appeal. Therefore, we set aside the order of the appellate tribunal on this issue and remand the matter back to the Deputy Commissioner for considering penalty on the party under Rule 173Q after issuing notice and after giving an opportunity to the party. This should be done within three months from the date of receipt of a copy of this judgment. C.N.RAMACHANDRAN NAIR, JUDGE. T.R.RAMACHANDRAN NAIR, JUDGE. kvs/-