Dharampal Satyapal LTD. And Anr. vs. Union Of INDIA And 3 Ors.

Held

The Court held that the writ petitions were maintainable, rejecting the respondents' contention that the alternative remedy was an absolute bar. The Court found that the alternative remedy was not efficacious or effective in the attending facts and circumstances. Regarding the merits, the Court considered the principles laid down in various precedents concerning the imposition of penalty, particularly the need for judicial discretion and the consideration of bona fide belief or technical breaches. The Court referenced cases like Collector of Customs, Bombay v. D.R. Gadgil and Sherres v. De Rutzen to emphasize that penalty is quasi-criminal and should not be imposed lightly, especially when there is a bona fide belief or a venial breach. Consequently, the Court found it appropriate to interfere with the impugned order. The impugned order dated March 24, 2022, along with the demand for penalty and interest, was set aside and quashed. The amount of Rs. 2 Crore deposited by the petitioner was permitted to be adjusted against future duties payable by the company.

Facts

The petitioners, including Dharampal Satyapal Ltd., challenged an order-in-original dated March 24, 2022, passed by the Principal Commissioner, GST & Central Excise, Guwahati. This order demanded recovery of Central Excise duty, interest, and penalty under Section 11A(10) of the Central Excise Act, 1944, read with Rule 18 of the Pan Masala Packing Machines (Capacity of Determination and Collections of Duty) Rule, 2008. The petitioner, Dharampal Satyapal Ltd., manufactures Pan Masala and calculates its Central Excise duty based on the annual production capacity determined by the number and speed of operating packing machines, as per Notification No. 42/2008-CE. The dispute arose concerning the declared maximum speed of newly purchased packing machines from Sanko Machinery Company Limited, Japan, which the petitioner declared as 750 pouches per minute based on trial runs, instead of the rated speed of 900-1000 pouches per minute.

Key Issues

1. Whether the writ petitions are maintainable despite the availability of an alternative remedy under the statute, considering the facts and circumstances of the case? 2. Whether the impugned order-in-original dated March 24, 2022, demanding recovery of Central Excise duty, interest, and penalty, is sustainable in law? Petitioner's arguments: The petitioners contended that the alternative remedy under the statute was not efficacious or effective in the present case, justifying the invocation of writ jurisdiction. They argued that the declared speed of the packing machines was based on actual trial runs and bona fide belief, and the authorities erred in demanding duty, interest, and penalty based on the rated capacity without considering these circumstances. They relied on precedents regarding the imposition of penalty, emphasizing that it should not be imposed merely because it is lawful, especially in cases of technical or venial breaches or where there is a bona fide belief of non-liability, citing principles related to mens rea and judicial discretion in penalty imposition. Revenue's arguments: The respondents argued that the writ petitions should be dismissed on the ground of the availability of an alternative statutory remedy.