THE COMMISSIONER OF CENTRAL EXCISE, CHANDIGARHversusM/S STESALIT LIMITED

                            [2017 j I S.C.R. 836



A   THE COMMISSIONER OF CENTRAL EXCISE. CHANDIGARH
                                     v.

                        MIS STESALIT LIMITED
                      (Civil Appeal No. 4507 of2004)
B                          FEBRUARY 15. 2017
    [J. CHELAMESWAR AND ABBAY MANOIIAR SAPRE, JJ.]
            Ce11tral Excise Act, 194./ - s. llAC - Ce11tra/ Excise Rules,
    194./ - r.173Q - No11-pay111e11t of duty - Demand of duty along with
    interest as also imposition of penalty uls. JI AC read with 1:173Q by
c   the adjudicating authority - Challenge raised only to the quantum
    of penalty - Reduction of penalty by the tribunal - Sustainability of
    - Held: In view of Dharamendra Textile case, the tribunal erred in
    reducing the penalty without giving justifiable reasons for the
    reduction - Failure of the tribunal to take into consideration the
D   Supreme Court judgment, rather reliance p/ac;ed on its earlier order
    - Thus, the order passed by the tribunal set aside.
           Allowing the appeal, the Court
            HELD: Applying the law laid down in *D/rnramendra
    Textile Processors case, to the facts of the case, the tribunal erred
E   in reducing the amount of penalty from Rs.2,06,000/- to
    Rs.50,000/-. The tribunal, failed to take into consideration the
    law laid down in the case of Dlwramendra Textile Processors which
    the tribunal was bound to take while deciding the appeal and
    instead the tribunal wrongly placed reliance on its own decision
F   in the case of **Escorts JCB Ltd. The tribunal gave no .instifiable
    legal reasons for reducing the penalty amount. The reasoning
    and the conclusion arrived at by the tribunal cannot be concurred
    with. They are not legally sustainable. The order passed by the
    tribunal is set aside and that of the adjudicating authority is
    restored. [Paras 15-17] [840-E-H]
G
           *Union of India & Ors. v. Dharame11dra Textile
           Processors & Ors. [2008] 14 SCR 13 : (2008) 13 SCC
           369 - relied ou.
           **Escorts JCB Ltd. vs CCE 2000 (118) ELT 650
H          (Tribunal); Dilip N. Shro.ff v. Jui11t Commissioner of
                                    836
THE COMMISSIONER OF CENTRAL EXCISE, CHANDIGARH                               837
             v. MIS STESALIT LIMITED

       Income Tax. Mumbai & Anr. [2007] 7 SCR 499 : (2007)                    A
       6 SCC 329; Chairman. SEBI v. Shriram Mutual Fund
       & Anr. (2006) 5 SCC 361 - referred to.
                         Case Law Reference
[2Q07] 7 SCR 499                 referred to               para 14
                                                                              B
c2006J 5 sec 361                 referred to               para 14
[2Q08] 14 SCR 13                 relied on                 para 15
(118) ELT 650 (Tribunal)         referred to               para 15
      CIVIL APPELLATE JURISDICTION: Civil Appeal No. 4507
                                                                              c
of2004.
       From the Judgment and Order No. 123 of 2004-B dated
05.11.2003 of the Customs, Excise and Service Tax Appellate Tribunal,
New Delhi in Appeal No. E/1122 of2003-B.
       K. Radhakrishnan, Sr. Adv., Ms. Binu Tamta, H. R. Rao,                 D
B. K. Prasad, Shreekant N. Terdal, Advs. for the Appellant.
       The Judgment of the Cou1t was delivered by
        ABHAY MANOHARSAPRE, J. I. This appeal is filed against
the judgment and final order No. 123/2004-B dated 05.11.2003 passed
                                                                              E
in Appeal No. E/1122 of2003-B by the Customs, Excise and Service
Tax Appellate Tribunal, New Delhi whereby the Tribunal partly allowed
the appeal and reduced the amount of penalty from Rs.2,06,000/- to
Rs.50,000/-.
       2. We herein set out the facts, in brief, to appreciate the issue
involved in this appeal.                                                      F

        3. The respondent-a Limited Company is engaged in the
manufacture of parts of Railways and Tramways stock classifiable under
Chapter 86 including smoothing Reactors falling under Chapter 85 .04 of
the Schedule t9 the Central Excise Tariff Act, 1985. The respondent
also undertakes the activity of modification/up-gradation of old Smoothing    G
Reactors received from the Railways.
        4. During the course of modification, the weight of copper coil in
the old smoothing reactors is increased by adding new copper coil to the
existing old copper coil.
                                                                              H
838            SUPREME COURT REPORTS                          [201 7] 1 S.C.R.


A              5. It was, however, observed by the authority concerned that the
      respondent manufactured copper coils from the copper strips and used
      them capatively in the up-gradation of smoothing reactors. The respondent,
      however, neither paid any duty on the copper coil used by them capativ.ely
      in their modification activity undertaken at the relevant period nor did
      they submit the requisite declaration under Rule 173-C of the Central
B
      Excise Rules, l 944(hereinafter referred to as "the Rules").
              6. Since no duty was paid by the respondent on upgraded reactors,
      they were not eligible for the benefit of exemption provided vide
      Notification No. 67/95-CE dated 16.03.1995. They were, therefore,
      required to pay duty on copper coils as an intermediate product which
c     was meant for captive consumption.
              7. This led to issuance of show cause notice dated 17.04.2001 to
      the respondent by the adjudicating authority proposing therein the demand
      ofunpaid duty payable by the respondent on the aforementioned goods
      and also penalty. By order dated 25.02.2003, the adjudicating authority
D     confirmed the demand of duty for Rs.2,05,291/- along with interest under
      Section 11-AB of the Central Excise Act, 1944 (hereinafter referred to
      as "the Act"). The authority also imposed a penalty of Rs.2,06,000/-
      under Section 11-AC of the Act read with Rule 173-Q of the Rules.
              8. Felt aggrieved by the aforesaid order, the respondent(assessee)
E     filed appeal before the Tribunal. The respondent, however, did not
      challenge the demand of duty but confined their challenge only to
      imposition of penalty and, in particular, its quantum. According to the
      respondent, having regard to the totality of the facts and circumstances
      of the case, at best, nominal amount of penalty could be levied on the
F     respondent but not the one imposed.
               9. By impugned order dated 05.11.2003, the Tribunal partly
      allowed the respondent's appeal and reduced the amount of penalty from
      Rs.2,06,000/- to Rs.50,000/-. It is against this order, the Revenue has
      filed this appeal by way of special leave before this Court.
G             10. Heard Mr. K. Radhakrishnan, learned senior counsel for the
      appellant. None appeared for the respondent.
              11. Mr. Radhakrishnan, learned senior counsel appearing for the
      appellant( Revenue) while assailing the legality and correctness of the
      impugned order contended that keeping in view the law laid down by
H
  THE COMMISSIONER OF CENTRAL EXCISE. CHANDIGARH                                    839
   v. M'S STESALIT LIMITED [ABHAY MANOHAR SAPRE, J.]

 this Court in Union of India & Ors. Vs. Dharamendra Textile                         A
 Processors & Ors., (2008) 13 SCC 369, which unfortunately was not
 taken note of by the Tribunal though it has direct bearing over the issue
 in question, the impugned order cannot be said to be legally sustainable
 and is, therefore, liable to be set aside and that of the adjudicating authority
 restored.
                                                                                    B
           I 2. It was his submission that the Tribunal had no jurisdiction to
. reduce the quantum of amount of the penalty imposed by the adjudicating
  authority on the respondent under Section I I-AC of the Act read with
  Rule 173-Q of the Rules in the light of the law laid down in Dharamendra
  Textile Processors's case (supra) and, more so, when in principle,
  neither the respondent questioned the grounds for its imposition and nor           c
  the Tribunal found any fault in the imposition. In other words, the
                                          '     .
  submission was that in the light of the law laid down in the case of
  Dharamendra Textile Processors (supra), there was no discretion
  left with the Tribunal to reduce the 'quanttJm of penalty amount once it
  held that a case for penalty is made out.                                          D
        · 13. Having heard the learned counsel for the appellant a~d on
 perusal of the record of the case, we are inclined to accept the submission
 of the learned counsel for the appellant.
          14. As rightly argued by the learned counsel for the appellant,
 the issue urged herein was examined by three judge Bench of this Court              E
 in Union of India & Ors. Vs. Dharamendra Textile Processors &
 Ors.(supra). It was a reference made to examine the correctness of
 the two earlier decisions of this Court rendered in Dilip N. Shroff vs.
 Joint Commissioner of Income Tax, Mumbai & Anr., (2007) 6
 SCC 329 and Chairman, SEBI vs. Shriram Mutual Fund & Anr.,                          F
 (2006) S SCC 361. Their Lordships examined the issue in detail and held
 that the law laid down in the case of Dilip N. Shroff (supra) is not
 correct whereas the law laid down in the case ofSEBI (supra) is correct.
 The. following observations of Their Lordships are apposite which reads
 as under:
                                                                                     G
          "15. The stand of learned counsel for the assessee is that
          the absence of specific reference to mens rea is a case of
          casus omissus. If the contention of learned counsel for
          the assessee ,is accepted that the use of the· expression
          "assessee shall ··.be liable" proves the existence of
                        '     '                                                      H
840                SUPREME COURT REPORTS                      [2017] 1 S.C.R.


A              discretion, it would lead to a very absurd result. In fact. in
               the same provision there is an expression used i.e.
               "liability to pay duty". It can by no stretch of imagination
               be said that the adjudicating authority has even a discretion
               to levy duty less than what is legally and statutorily
               leviable ............. "
B
               "19. In Union Budget of 1996-1997, Section 11-AC of the
               Act was introduced. It has made the position clear that
               there is no scope for any discretion. In Para 136 of the
               Union Budget reference has been made to the provision
               stating that the levy of penalty is a mandatory penalty. In
c              the Notes on Clauses also the similar indication has been
               given.
              20. Above being the position, the plea that R~les 96-ZQ
              and 96-ZO have a concept of discretion inbuilt cannot be
              sustained. Dilip Sltroff case was not correctly decided but
D             SEBI case bas analysed the legal position in the correct
              perspectives. The reference is answered ................. "
                                                         (emphasis supplied)
              15. Applying the aforementioned law to the facts of this case,
E     we are of the considered opinion that the Tribunal erred in reducing the
      amount of penalty from Rs.2,06,000/-to Rs.50,000/-. Indeed, the Tribunal,
      in our opinion, failed to take into consideratio~ the law laid down in the
      case of Dharamendra Textile Processors (supra) which the Tribunal
      was bound to take while deciding the appeal and instead the Tribunal
      wrongly placed reliance on its own decision in the case of Escorts
 F    JCB Ltd. vs CCE 2000 (118) ELT 650 (Tribunal). We also find that
      the Tribunal gave no justifiable legal reasons for reducing the penalty
      amount.
               16. ln the light of foregoing discussion, we are unable to concur
      with the reasoning and the conclusion arrived at by the Tribunal. They
G     are not _legally sustainable and, therefore, deserve to be set aside.
               17. The appeal thus succeeds and is accordingly allowed.
      Impugned order is set aside and that of the order passed by the
      adjudicating authority is restored. No costs.

H     Nidhi Jain                                                   Appeal allowed.