IMPORTANT POINT
Central Excise Act created no liability for any penalty hence confiscation proceedings would be unwarranted and without authority of law.

ORDER

The short question that arises for our consideration in these appeals, which arises from the judgments and orders dated 10.2.1997 and 26.3.1996, as regards jurisdiction of the authorities under the Central Excise Act, whether it is permissible to resort to penalty proceedings or forfeiture of goods for non-payment of additional duty in terms of the Additional Duties of Excise (Goods of Special Importance) Act, 1957 (for short the Act ) by taking recourse to the provisions of the Central Excise Act and Rules framed thereunder.

2. The respondents herein carry on business of manufacture of man made fabrics. They have alleged to have misdisclosed the composition of certain sorts of fabrics. They were further alleged to have under valued goods by not paying duty on the amount realised through debit notes. The Collector, by his order dated 17th November, 1987, confirmed the levy of duty, amounting to Rs. 1,19,453,59. The Collector held that 35 bales of Fabric of Sort Nos. 1200 and 1300 are liable to be confiscated, but since the goods had already been released, he appropriated a sum of Rs. 10,000/- towards the value of goods. He also imposed the penalty of Rs. 50,000/-. Aggrieved, the respondents preferred appeals before the Central Excise and Gold (Control) Appellate Tribunal.

3. The Tribunal relying upon the decision in the case of Pioneer Silk Mills Pvt. Ltd. vs. Union of India, reported in 1995 (80) E.L.T. 507 (Del.), allowed the appeals, holding that the provisions of Central Excise Act and the Rules made thereunder, so far as they relate to confiscation cannot be made applicable for the breach of provisions of the Act. It is against the said judgment and order of the Tribunal, the appellant is in appeal before us.

4. Mr. S.R. Bhat, learned counsel appearing for the appellant, urged that the view taken by the Tribunal in allowing the appeals was erroneous inasmuch as it is contrary to the decisions in the case of M/s. Khemka & Co. (Agencies) Pvt. Ltd. vs. State of Maharashtra, reported in 1975(2) SCC 22 and Commissioner of Central Excise vs. Ashok Fashion Ltd., reported in 2002 (141) E.L.T. 606 (Gujarat).

5. In order to appreciate the issue, it is relevant to set out the sub-section (3) of Section 3 of the Act, as applicable in this matter and which runs as under :

"SECTION 3 : Levy and collection of additional duties :

(1) ...............

(2) ...............

(3) The provisions of the Central Excise and Salt Act, 1944 and the rules made thereunder including those relating to refunds and exemptions from duty shall, so far as may be apply in relation to the levy and collection of the additional duties as they apply in relation to the levy and collection of duties as they apply in relation to the levy and collection of the duties of excise on the goods specified in sub-section (1)."

6. A perusal of the said provision shows that the breach of the provision of the Act has not been made penal or an offence and no power has been given to confiscate the goods. It only provides for application of the procedural provisions of the Central Excise and Salt Act, 1944 and the Rules made thereunder. It is no longer res integra that when the breach of the provision of the Act is penal in nature or a penalty is imposed by way of additional tax, the constitutional mandate requires a clear authority of law for imposition for the same. Article 265 of the Constitution provides that no tax shall be levied or collected except by authority of law. The authority has to be specific and explicit and expressly provided. The Act created liability for additional duty for excise, but created no liability for any penalty. That being so, the confiscation proceedings against the respondents were unwarranted and without authority of law.

7. The Parliament by reason of Section 63(a) of the Finance Act, 1994 (Act No. 32 of 1994) substituted sub-section (3) of Section 3 of the said Act, which now reads as under :

"3. Levy and collection of Additional Duties