IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH CM No. 26347-CII of 2011 in CEA No. 51 of 2011 Date of decision: 08.11.2011 Wrigley India Pvt. Ltd. …..Appellant vs. Commissioner of Central Excise Commissionerate, Chandigarh …..Respondent CORAM: - HON’BLE MR. JUSTICE HEMANT GUPTA HON’BLE MR. JUSTICE G.S.SANDHAWALIA Present: - Mr. M.P.Dev Nath, Advocate for the appellant. Mr. Sukhdev Sharma, Advocate for respondent. HEMANT GUPTA, J The assessee has claimed four substantial questions of law but in respect of questions of (i) and (ii), the matter stands concluded against the assessee by the Division Bench judgment of this Court reported as Wrigley India Pvt. Ltd. Vs. Commissioner C. Ex., Chandigarh, 2010(255)E.L.T 201 (P&H) in the assessee’s own case. In fact, notice was issued to the revenue only in respect of the following substantial questions of law: - (iii) “Whether the order passed by the Tribunal is correct in imposing penalty on the appellants when the issue involved in the present case relates to interpretation of the Cenvat Credit Rules. (iv) Whether the order passed by the Tribunal is correct in imposing penalty on the appellants when the CEA No. 51 of 2011 Department in its appeal before Tribunal had not challenged the non imposition of penalty by the Adjudicating Authority.” Learned counsel for the appellant has pointed out that in respect of the period prior to September 2001, the Commissioner (Appeals) in its order dated 23.3.2003 have returned a finding that no case is made out for imposition of penalty as the issue involves interpretation of Modvat rules and there is no evidence misusing the Modvat facility with a mala fide intention. The operative part of the order reads as under: - “As regards the contention of the appellants regarding imposition of penalty, I observe that the issue involves interpretation of Modvat rules and there is no evidence on record to show that the appellants have misused the modvat facility with a mala fide intention. No penalty is therefore, leviable on them and as such the penalty imposed in the Order-in-Original is set aside.” Admittedly, revenue has not challenged the said order in appeal. For the subsequent period, the show cause notice was issued as to why the assessee has claimed Modvat credit as an input in respect of the values of Tatoos. The Adjudicating Authority vide the order dated 25.2.2004 (Annexure P-7) dropped the proceedings initiated against the assessee. The revenue went in appeal before the Customs, Excise & Service Tax Tribunal (in short the ‘Tribunal’). The 2 CEA No. 51 of 2011 Tribunal vide its order dated 16.3.2010 allowed the appeal, the subject matter of challenge in the present appeal with the following observations: - “….Accordingly, the appeal is allowed. In the absence of any new evidence cross objection is rejected and the amount of Rs. 79,90,852/- which was availed as Cenvat credit on the said product is declared as illegal and is recoverable by the department, along with interest thereon in terms of provision of law comprised under Rule 12 of the Cenvat Credit Rules, 2002 read with Section 12A of Central Excise Act, 1944 and Section 11AB of the said Act. The respondents are also liable to be subject to penalty of equal amount in terms of Rule 13(2) read with Section 11AC of the Central Excise Act, 1944. Order accordingly, Appeal is allowed with consequential relief.” Learned counsel for the assessee has vehemently argued that once, the Adjudicating Authority for the earlier period has taken a view that there is no mala fide intention in the claim of the Modvat credit by the assessee and the revenue has not challenged the said order, therefore, the imposition of the penalty of the equal amount is unjustified for the subsequent period. Reliance is placed upon a Division Bench judgment of this Court rendered in Commissioner of Central Excise vs. Maruti Udyog Ltd 2010 (262) ELT 180 (P&H), wherein, after considering the judgment of Hon’ble the Supreme Court rendered in Union of India vs. Dharamendra Textile Processors 2008(231) E.L.T. 3(S.C.) it has been held to the following effect:- 3 CEA No. 51 of 2011 14. Hon’ble the Supreme Court then in para 20 proceeded to analyse the judgment in Dharamendra Textiles case (supra). It noticed that the Revenue has been relying upon the aforesaid judgment as if in every case of non-payment or short payment of duty, the penalty envisaged by Section 11AC would automatically get attracted and that the authority had no discretion in the matter. It was observed that there was no reason to understand or read the judgment in Dharamendra Textiles case (supra) in that matter. After referring to various paras of the judgment in Dharamendra Textiles case, their Lordships observed in para 21 of the latter judgment that they could not see as to how “the decision in Dharamendra Textiles case can be said to hold that Section 11AC would apply to the other case of non-payment or short payment of duty regardless of the conditions expressly mentioned in Section for its application”. It was further observed that in Dharamendra Textiles case even the Revenue has not taken that stand and in that regard, submissions made in para 5 of the judgment were noticed by their Lordships in Union of India vs. Rajasthan Spinning and Weaving Mills 2009(238) E.L.T. 3 (S.C.). The Hon’ble Supreme Court accordingly held as under: - “23. The decision in Dharamendra Textiles case must, therefore, be understood to mean that though the application of Section 11AC would depend upon the existence or otherwise of the conditions expressly stated in the section, once, the section is applicable in a cas the concerned authority would have no discretion in quantifying the amount and penalty must be imposed equal to the duty determined under sub-section (2) of Section 11A. That is what Dharamendra Textiles decides. 4 CEA No. 51 of 2011 24. It must, however, be made clear that what is stated above in regard to the decision in Dharamendra Textiles is only in so far as Section 11AC is concerned. We make no observations (as a matter of fact there is no occasion for it) with regard to the several other statutory provisions that came up consideration in the decision.” In the present case, tribunal has not given any finding as to why the penalty of equal amount in terms of Rule 13(2) read with Section 11AC of the Central Excise Act, 1944 is imposable when the revenue has accepted the order of the Adjudicating Authority for the earlier period. It has been recorded therein that there was no mala fide intention in availing Modvat credit. Therefore, we find that the order of the Tribunal in imposing penalty of the equivalent amount as that of the duty is not sustainable. The matter is remitted back to the Tribunal to consider the question as to whether any penalty is imposable keeping in view the earlier order of the Adjudicating Authority and the extent & nature of default, if any, committed by the appellant. Disposed of in the above terms. (HEMANT GUPTA) JUDGE (G.S.SANDHAWALIA) JUDGE 8.11.2011 preeti 5