IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 1733 of 2010 FOR APPROVAL AND SIGNATURE:

HONOURABLE MR. JUSTICE BHARGAV D. KARIA and HONOURABLE MR. JUSTICE PRANAV TRIVEDI ==========================================================

Approved for Reporting Yes No ✔

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M/S TRIDENT STEEL Versus UNION OF INDIA & ANR.

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Appearance:

MR HASIT DAVE(1321) for the Appellant(s) No. 1 DEEPAK N KHANCHANDANI(7781) for the Opponent(s) No. 2 ==========================================================

CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA and HONOURABLE MR. JUSTICE PRANAV TRIVEDI Date : 13/08/2025

ORAL JUDGMENT

(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)

1. Heard learned advocate Mr. Hasit Dave for the appellant and learned advocate Mr. Deepak Khanchandani for the respondents.

2. The Tax Appeal is not yet admitted and, therefore, the same is admitted for consideration of the following substantial questions of law:

(a) Whether the Provisions of Rule 96Z0 of the Central Excise rules 1944 as it stood then can be read with Section 11 AC of the Central Excise Act in imposing any penalty on the appellant?

(b) Whether the provisions of Rule 96 ZO are independent of section 11 AC and can be invoked in the present case?

3. Learned advocate Mr. Hasit Dave submitted that the interest and penalty provision under Rules 96ZO, 96ZP and 96ZQ of the Central Excise Rules, 1944 are held to be invalid by the Hon’ble Apex Court in case of Shree Bhagwati Steel Rolling Mills v. Commissioner of Central Excise, reported in 2015 (326) E.L.T 209 (S.C). It was, therefore, submitted that in view of the decision of the Hon’ble Apex Court, both the questions are required to be answered in favour of the appellant.

4. In order to answer the questions in light of the decision of the Hon’ble Apex Court, it would be germane to refer to the facts of the case as under:

4.1 The appellant was engaged in manufacturing of M.S. Ingots and Billets falling under sub Heading No. 7206.90 and 7204.90 of the Schedule to the Central Excise Tariff Act, 1985.

4.2 The appellant was availing the Compound Levy Scheme prescribed under Section 3A of the Central Excise Act, 1944 read with Rule 96ZO(3) of the Central Excise Rules, 1944. It is the case of the appellant that the duty liability under the Compound Levy Scheme was discharged from September, 1997 onwards, however, the appellant informed the Executive Engineer about the breakdown problem in the factory of the appellant by letter dated

2.12.1997. The Gujarat State Electricity Board disconnected the power supply of the factory from 17.12.1997 on account of non-payment of the electricity charges. The appellant, therefore, closed down the factory unit with effect from 17.12.1997 completely and there was no production activity whatsoever since then.

4.3 The appellant also informed the Superintendent of Central Excise & Customs, Kalol by letter dated 17.12.1997 about the discontinuation of production activities on account of appellant’s monetary crisis and disconnection of power by Gujarat State Electricity Board because of non-payment of electricity charges by the appellant. The appellant by letter dated 20.3.1998 also informed the Assistant Commissioner, Range II Central Excise, Paldi that the Unit has stopped production since 17.12.1997.

4.4 The respondents issued 8 show-cause notices for levy of duty for the period from March 5, 1998 to December 31, 1999. The show- cause notices were adjudicated and demand of duty was raised along with interest and penalty under Rule 96ZO read with Section 11AC of the Central Excise Act, 1944.

5. Being aggrieved, the appellant preferred an appeal before the Commissioner (Appeals- III), Central Excise, who by order dated 20.1.2005 confirmed the levy of duty for the period from September, 1997 to December, 1997. However, the penalty levied under Section 11AC read with Rule 96ZO was reduced to Rs. 6 La