PLD 1994 Lahore 135 (PLP)

On 19‑1‑1992, the Deputy Collector, Central Excise and Sales Tax, Faisalabad called upon the petitioner to show cause as to why it be not proceeded against for having violated rules 9, 52, 52‑A, 241, 246, 210 and 226 of the Central Excise Rules, 1944. The petitioner contested this notice by file a reply. However, on 24th July, 1992, the Deputy Collector held the petitioner guilty of violation of the aforesaid rules and imposed a penalty of Rs.200,000 upon it under rule 226 of the Central Excise Rules, 1944.

2. Feeling aggrieved by this order, the petitioner went in appeal before the Collector (Appeals) but the same was dismissed on 23rd November, 1992. The petitioner took the matter in revision before the Federal Government which was partly accepted on 23‑4‑1993 and the penalty was reduced from Rs.2,00,000 to Rs.1,00,000.

3. In support of this petition, the contention raised by the learned counsel for the petitioner was that under rule 226 of the Central Excise Rules, 1944 (as is stood at ,the relevant time) the maximum penalty which could be imposed was Rs.2,000 or 10 times the duty involved whichever was higher and as there is no finding regarding amount of duty evaded, the Deputy Collector could not levy a penalty of Rs.200,000:

4. No one has appeared for the respondents; they are proceeded against ex parte.

5. There is considerable merit in the contention raised by the learned counsel for the petitioner. Rule 226 of the Central Excise Rules, 1944 under which the Deputy Collector has levied the duty reads as under:‑‑‑ "How entry books, stock accounts and warehouse registers should be maintained ...(1) Where any person is required by these rules to maintain any entry book, stock accounts or warehouse register in respect of goods produced, manufactured or stored by him or a register (or a bill of charges book) in respect of excisable services provided or rendered by him or other documents including the bound book containing copies of applications made for the clearance of manufactured goods, he shall:‑‑‑ (i) at the time of making any entry, intsert the date when the entry is made; (ii) correctly keep such (books) accounts or register in the manner required, and shall not cancel, obliterate or alter any entry therein, except for correction of any errors, with the sanction and. in the presence of the proper officer, and shall not make any entry therein which is untrue in any particular; ' (iii) keep (such books) accounts or register at all times ready for the inspection of the officers, and shall permit any officer to inspect it and make any such minute therein or any‑extract therefrom as the officer thinks fit, and shall at any time, if demanded, send it to the proper officer; and (iv) unless otherwise prescribed by the other provisions of these rules, preserve them for a period of (six years) from the close of the financial year to which they relate and shall make them available for inspection by any Central Excise Officer at any time; . any person who fails to enter the required particulars within the time prescribed in the relevant rules, or who fails to keep or preserve such books, accounts or registers, as the case may be, or to deliver them up to the officer, or the Central Excise Officer on demand, or who obstructs or hinders such officer in making any minute therein or extract therefrom, or. conveys away or conceals it, or destroys or tears out any leaf therefrom, or makes any false entry therein or fraudulently alters any entry therein, shall be liable to a penalty which may extend to two thousand rupees or ten times, the amount of duty involved, whichever is greater, and all the goods of which due' entry has not been made in such books shall be liable to confiscation."

6. While imposing the penalty at Rs.2,00,000, the Deputy Collector in his order dated 24‑2‑92 observed that:‑‑‑ "It is confirmed that the party violated the provisions of Rules 9, 52, 52‑A, 241, 244 and 246 of the Central Excise Rules, 1944. The Superintendent City Circle, Faisalabad is directed to conduct comprehensive audit and ensure whether any evasion had taken place due to this wrongly manipulation of the record. A personal penalty of Rs.2,00,000 is imposed under Rules 226 of the Central Excise Rules, 1944 as the party have violated the Central Excise Rules as quoted above."

7. On a proper analysis of sub‑rule (1) of rule 226 of the Central Excise Rules, 1944 which has been reproduced above, it becomes apparent that it provides for imposition of penalty of Rs.2,000 at the maximum or ten times the amount of duty evaded. In the impugned order, there is no quantification of the duty involved or evaded. The only penalty which could be imposed upon the petitioner was of Rs.2,

000. If the Deputy Collector wanted to exercise the other option available to him i.e. levying penalty at the rate of 10 times the duty evaded, that was only possible after the amount of duty had been calculated and determined. The impugned order shows that the Deputy Collector did not make any such determination and remitted the matter to the Superintendent, Excise, City Circle, Faisalabad with direction to conduct comprehensive audit and to find out that any evasion of duty had taken place due to the manipulation of the record. Without such determination no penalty in excess of Rs.2,000 could be levied. As a result of what has‑been stated above, this petition is allowed; the impugned order to the extent of levy of penalty in excess of Rs.2,000 is declared to be without lawful authority and of no legal effect. It is, however,‑ clarified that this judgment shall not debar the respondents from passing a fresh order after determining the amount of duty involved. No order as to costs. AA./N‑194/L Petition accepted