Excise Procedures & Litigation UpdatesRule 96-ZO, 96-ZP and 96-ZQ Under Compounded levy Are Ultra Vires

April 10, 20160

The Supreme Court of India  on the issue of imposition of  penalty under Compunded levy scheme held that penalty can only be levied by authority of statutory law.

Further, Section 37 does not expressly authorise levy of penalty higher than Rs 5000. Thus, imposition of a mandatory penalty equal to the amount of duty not being a statutory levy makes Rr. 96-ZO, 96-ZP and 96-ZQ without authority of law.

Also, interest can be levied and charged on delayed payment of tax only if statute that levies and charges the tax makes a substantive provision for imposition of interest. Since parent provision Section 3A that levies and charges the tax does not provide for levying penalty, subsidiary provisions Rule  96-ZO, 96-ZP and 96-ZQ providing for imposition of mandatory penalty equivalent to amount of duty are ultra vires parent provision.

Hence, said Rules providing for penalty and interest are invalid since without authority of law.

[Shree Bhagwati Steel Rolling Mills v. CCE, (2016) 3 SCC 643]

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