Chiranjib Roy Choudhury vs. The Union Of INDIA And 3 Ors

Held

The Court held that the writ petitioner could not be non-suited on the ground of availability of an alternative remedy, finding it not efficacious and effective in the attending facts and circumstances. The Court considered it appropriate to interfere with the impugned order. The Court quashed the impugned order dated March 24, 2022, along with the imposed penalty and interest. The amount of Rs. 2 Crore deposited by the petitioner was permitted to be adjusted against future duties that may be found payable by the petitioner company. The Court's reasoning for quashing the order was based on the understanding that the penalty and interest were imposed without proper consideration of the circumstances, particularly the bona fide belief of the petitioner regarding the operational capacity of the machines and the technical issues encountered. The Court also referenced precedents emphasizing that penalty should not be imposed arbitrarily but judiciously, considering all relevant circumstances, and that a technical or venial breach, or a breach flowing from a bona fide belief, might justify refusal to impose penalty. The issue of mens rea as an essential ingredient of an offence was also discussed in relation to penalty imposition.

Facts

The petitioners, including Dharampal Satyapal Ltd. and its directors/employees, 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 dispute arose from the declared maximum speed of packing machines used for manufacturing pan masala. The petitioner company had purchased packing machines from Sanko Machinery Company Limited, Japan, which, during pre-delivery trials, experienced technical issues, leading the supplier to advise operating them at a reduced speed of approximately 750 pouches per minute, instead of the rated speed of 900-1000 pouches per minute. The petitioner declared this reduced speed for duty calculation.

Key Issues

1. Whether the impugned order-in-original dated 24.03.2022, demanding recovery of Central Excise duty, interest, and penalty, passed by the Principal Commissioner, GST & Central Excise, Guwahati, is sustainable in law, particularly concerning the determination of the maximum speed of packing machines under the Pan Masala Packing Machines (Capacity of Determination and Collections of Duty) Rule, 2008, and Section 11A(10) of the Central Excise Act, 1944? Petitioner's arguments: The petitioners contended that the declared speed of the packing machines was based on the actual operational capacity experienced during pre-delivery trials due to technical issues, as advised by the manufacturer. They argued that the authorities erred in disregarding this operational speed and imposing duty based on the rated capacity. Furthermore, they argued that the alternative remedy of appeal was not efficacious given the facts and circumstances, justifying the invocation of writ jurisdiction. They also 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 bona fide beliefs. Respondents' arguments: The respondents argued that the writ petitions should be dismissed on the ground of availability of an alternative remedy under the statute.