Harsha Devani, J.

1. Since common facts and questions of law are involved in all these petitions the same were taken up for hearing together and are decided by this common judgment. In Special Civil Application No. 1984 of 2002, the petitioners have challenged the constitutional validity of Rule 96ZQ(5)(ii) of the Central Excise Rules, 1944 (hereinafter referred to as the Rules) prescribing imposition of penalty equal to the amount of duty outstanding from an independent processor of textile fabrics in case such person fails to pay the amount of duty or any part thereof by the specified date, on the ground that the said rule is ultra vires the Constitution of India. The petitioners have also challenged the order-in-original dated 1st January, 2002 passed by the Deputy Commissioner, Central Excise, Di-vision-II, Ahmadabad-I insofar as the same imposes penalty under Rule 96ZQ(5)(ii) of the Rules.

2. In Special Civil Application No. 3637 of 2004, the petitioner has challenged the order-in-original No. 41-45/D/2003 dated 31st December, 2003 passed by the Deputy Commissioner of Central Excise, confirming total demand of Rs. 12,45,370/- under Rule 96ZP(3) of the Central Excise Rules, 1944 and imposing equal amount of penalty as well as interest at the appropriate rate on the confirmed amount under Rule 96ZP(3) of the Rules.

3. In Special Civil Application No. 6779 of 2003, the petitioners have challenged Order-in-Original No. SRT-VI/Adj-778/2001-0A dated 30th October, 2001 passed by the Deputy Commissioner of Central Excise & Customs insofar as imposition of penalty equal to the amount of duty amounting to Rs. 6,00,000/- (rupees six lakhs) under Rule 96ZQ(5)(ii) read with Rule 173Q(1) of the Rules on the petitioners is concerned.

4. Thus all the three petitions challenge levy of penalty equal to the amount of duty under Rule 96ZQ(5)(ii)/96ZP(3) of the Rules, whereas the petitioners in Special Civil Application No. 1984 of 2002 have also challenged the constitutional validity of Rule 96ZQ(5)(ii) of the Rules.

Facts :

5. Special Civil Application No. 1984 of 2002 :

The petitioner firm is engaged in the activity of processing textile fabrics. The fabrics are covered under the Schedule to the Central Excise Tariff Act, 1985 and are, therefore, exigible to levy of Central Excise. The Central Government enacted Section 3A of the Central Excise Act, 1944 (hereinafter referred to as the Act) under which power was conferred upon the Central Government to charge excise duty on the basis of capacity of production in respect of notified goods. With effect from 6th December, 1998, the textile fabrics produced by the petitioner company were notified for the purpose of Section 3A of the Act and accordingly, the excise duty on such notified textile fabrics became leviable and recoverable on the basis of the production capacity of manufacturers of textile fabrics. The Central Government issued various notifications and framed rules for determination of annual production capacity of the manufacturers of notified goods for implementing the scheme of Section 3A, popularly known as Compounded Levy Scheme. Vide notification dated 10th December, 1998 Part E. XIA which bears the heading "Processed Textile Fabrics" came to be inserted in the Rules. Rule 96ZQ of the Rules which falls under the said part provided for the procedure to be followed by an independent processor of textile fabrics. The production capacity and duty liability of the petitioners factory came to be determined in accordance with the provisions of the Hot Air Stenter Independent Textile Processors Annual Capacity Determination Rules, 1998 (hereinafter referred to as the Determination Rules) which came to be communicated by a letter dated 25th September, 2000 (Annexure B to the petition).

5.1. Under the provisions of sub-rule (3) of Rule 96ZQ of the Rules, 50% of the amount of duty on the annual capacity of production as determined under the Hot Air Stenter Independent Textile Processors Annual Capacity Determination Rules, 1998 payable for a calendar month under sub-rule (1) thereof was required to be paid by the 15th of the month and the remaining amount was required to be paid by the end of that month. It appears that the petitioner in respect of the first fortnight of July, 2000 for which the due date specified was 15th July, 2000 made payment of Rs. 5 lakhs on 19th July, 2000, after a delay of about four days. In respect of the second fortnight of September, 2000, for which the due date specified, was 30th September, 2000, duty of Rs. 9 lakhs came to be paid on 3rd October, 2000. A show-cause notice dated 4th October, 2001 came to be issued to the petitioner firm for violation of the provisions of Rule 96ZQ(3) read with Rule 173G of the Rules calling upon the petitioners to show cause as to why penalty of Rs. 14 lakhs should not be imposed upon them under Rule 96ZQ(5)(ii) and interest at the rate of 24% per annum calculated for the outstanding period on the outstanding amount as per Rule 96ZQ(5)(ii) of the Rules should not be recovered. The petitioner firm submitted its reply dated 8th November, 2001 explaining that they were supposed to pay 50% of their excise liability by 15th July, 2000 but by the 13th of that month, there was a heavy downpour of water which lasted for nearly twenty four hours which was well published in the newspapers and known to all. The water caused heavy logging at almost all places and their factory was also flooded as water entered the premises and their machineries and electric motors were under 1.5 feet water. It took four days for them to clear the debris of rainwater and their production also was affected for four days. During the said period, their bankers also did not operate their business due to lack of staff who also suffered due to water-logging. So the operation of the bank started on 18th July, 2000 and they deposited the amount on the same day and challan was passed on 19th July, 2000. It was the case of the petitioners that it was not their intention to make the payment late. In respect of September, 2000, it was the case of the petitioners that they had deposited the amount of Rs. 9 lakhs on 29th September, 2000 and challan was also deposited. But, 30th September was half-year closing and it was closed for public transactions and the next working day was 3rd October, 2000. 1st October was a Sunday and 2nd October was a public holiday on account of Gandhi Jayanti. So the bankers put 3rd October, 2000 on TR-6 challan. The petitioners, accordingly, requested the Deputy Commissioner not to impose any penalty as per Rule 96ZQ(5) of the Rules and interest of 24 per cent as it was not their intention to make the payment late and it was only under unavoidable circumstances.

5.2. By the impugned order dated 9th November, 2001/1st January, 2002, interest of Rs. 1315/- for the period of four days on the outstanding amount of Rs. 5 lakhs and Rs. 1775/- for the period of three days on the outstanding amount of Rs. 9 lakhs as also a penalty of Rs. 9 lakhs in terms of the provisions of Rule 96ZQ(5)(ii) came to be imposed on the petitioners which is subject matter of challenge in the present petition. The petitioners have also challenged the validity of Rule 96ZQ(5)(ii) of the Rules as being ultra vires the provisions of the Constitution and the Act.

5.3 By a judgment and order dated 24th June, 2002, this court observed that in Special Civil Application No. 164/2002 and cognate matters, the court had held that although the provisions of clause (ii) of sub-rule (5) of Rule 96ZQ of the Rules were not declared as ultra vires, the authority was required to be directed to read the rule in a reasonable manner, i.e. to say, the penalty stipulated therein is only the maximum amount which can be levied and the assessing authority has the discretion to levy lesser amount depending upon the facts and circumstances of each case. The court, accordingly, allowed the petition by quashing and setting aside the impugned order-in-original insofar as the same imposed penalty under Rule 96ZQ(5)(ii) of the Rules and remanded the matter to the authorities. It was further observed that the remaining portions of the impugned order are not interfered with, for the simple reason that the petitioners have preferred appeals for challenging the other portions of the order levying duty and interest. The respondents herein carried the aforesaid judgment and order passed by this court in appeal before the Supreme Court. The Supreme Court in the case of Union of India and Others v. M/s. Krishna Processors and Another [2009 (237) E.L.T. 641 (S.C.)] held that in view of the decision of the Union of India v. Dharamendra Textile Processors, 2008 : (231) E.L.T. 3 (S.C.), Rule 96ZQ is mandatory. The court held that the consequence of the said judgment in Dharamendra Textile Processors is that the challenge to the vires of Rule 96ZQ(5)(ii) in the original writ petition before the High Courts stands revived. The Supreme Court, accordingly, remitted the entire batch of civil appeals to the respective High Courts for deciding the question of vires of the above sub-rule. The court also granted liberty to the assessees to amend the writ petitions/appeals, if so advised. Further liberty was granted to both sides to complete their pleadings at the earliest before the High Court(s). This is how the matter stands revived and has come up for hearing before this court.

6. Special Civil Application No. 3637 of 2004 :

6.1. The facts of the case as appearing in the petition are that the petitioner is a partnership firm, inter alia, engaged in the business of manufacturing of steel products like round bars, etc. falling under Chapter 72 of the Schedule to the Central Excise Tariff Act, 1985. Section 3 of the Central Excise Act, 1944 provides for levy and collection of dues of excise on all excisable goods which are produced or manufactured in India. However, with effect from 14th May, 1997, the Union Government framed Section 3A under which the power to charge excise duty on the basis of capacity of production in respect of goods notified under the said Section 3A has been conferred on the Central Government. Section 3A of the Act also confers powers on the Central Government to issue notifications and also the rules for various matters arising under Section 3A so as to charge excise duty on the basis of the capacity of production in respect of the notified goods. The Central Government promulgated Rule 96ZP(3a) of the Central Excise Act, 1944, thereby providing for the procedure to be followed by the manufacturers of steel re-rolling products like the goods manufactured by the petitioners herein. Rule 96ZP and various other Rules including Hot Re-Rolling Steel Mills Annual Capacity Determination Rules, 1997 are framed by the Central Government in exercise of the powers conferred by it under Section 3A read with Section 37 of the Act.

6.2. The Central Government issued notifications in connection with Steel Rolling Mills under Section 3A of the Act thereby providing for levy and collection of excise duty on the steel rolling mills on the basis of their Annual Production Capacity (APC). It appears that being aggrieved and dissatisfied with the action of the Government, some of the Steel Rolling Mills Owners challenged the validity of Section 3A of the Act as well as those notifications including denial of Modvat benefit before the Delhi High Court which came to be admitted by an order dated 28th December, 1997, whereby the interim relief was also granted in favour of those petitioners. Against the said decision of the Delhi High Court, the Union of India preferred appeal before the Supreme Court. Considering the fact that the matter involved great public importance and affected interest of manufacturers throughout the country, by an order dated 3rd March, 1998, the Supreme Court transferred all the petitions before it. In the said matters, the Supreme Court passed an interim order dated 21st April, 1998 in Civil Appeals No. 52 to 63 of 1998 in the following terms :-

While the matters are pending in this court, the Union Government shall not take any penal or coercive measures under the notification No. 07/98 -Central Excise (N.T.) dated March 10, 1998. It will be open to the manufacturers to submit application on the basis of the actual production and, if any such application is submitted the same shall be duly considered by the competent authority in accordance with the rules.

6.3. During the pendency of the above referred proceedings, the petitioners were also following the procedure prescribed under Rule 96ZP of the Rules because there was no option for the manufacturers like the petitioners but to discharge duty liabilities under the Compounded Levy Scheme. The Annual Production Capacity of the petitioners factory was fixed on the basis of the parameters of factory at 3260 MTs for the period from 1st April, 1998 to 21st July, 1998, and at 2373 MTs for the period form 1st August, 1998 to 31st March, 1999 vide letter dated 27th October, 1998.

6.4. Since the above referred APC was much higher than the annual production of the petitioners factory, the petitioners were paying duty only on the basis of the actual production and not in accordance with the above APC which was much higher and much in disproportion, to the actual production capacity as well as actual production of the factory. The petitioners, in fact, also closed down the factory with effect from 5th May, 1998, and an intimation in that regard was also submitted by the petitioners on 27th July, 1998. It appears that the Gujarat Electricity Board had also disconnected power supply of the petitioners unit with effect from 24th June, 1998 because the petitioners failed to pay electricity charges to the GEB. The petitioners also formally informed the Superintendent of Central Excise vide letter dated 1st February, 1999 that the registration was being surrendered as there was no production in the factory from May 1998, the GEB had disconnected power supply from June 1998 and there was no alternative source of power like DG set with the petitioners using which any production could be made in the factory.

6.5. It appears that the Range Superintendent did not accept the petitioners request for surrendering/cancelling registration on the ground that there were pending show cause notices against the petitioners. A certain correspondence was exchanged between the parties in this regard wherein the Superintendent refused to cancel registration whereas the petitioners were insisting on surrendering and cancelling registration on execution of an undertaking for paying up any duty liability that may arise in future. In view of the above referred facts and undisputed closure of the factory from 5th May, 1998, the petitioners were also not liable to pay any compounded levy amount for the period from May 1998 onwards. According to the petitioners, even for the period prior thereto., the petitioners were not legally obliged to pay any duties on the basis of the APC when the actual production capacity and the actual production were much lower than the APC. It appears that five show cause notices covering the period from 1st September, 1997 to 31st March, 2000 were issued to the petitioners proposing to recover various amounts of compounded levy on the ground that the petitioners had not discharged duty liability in accordance with the APC and duty liability as determined by the Department.

6.6. In response to the show cause notices, the petitioners filed reply to the effect that the issue of the validity of Compounded Levy Scheme was pending before the Supreme Court and therefore, adjudication be kept in abeyance. The petitioners also challenged the compounded levy scheme and recovery being proposed thereunder before this Court by way of a writ petition being Special Civil Application No. 11931 of 2000. During the pendency of these show cause notices, the Supreme Court decided the controversy about Section 3A of the Act and the Compounded Levy thereunder in a group of cases between the Union of India v. Supreme Steels and General Mills and Others, : 2001 (47) RLT 129 (SC) = 2001 (133) E.L.T. 513 (S.C.). In the said decision, the Supreme Court directed that the assessment shall be made for the whole time of one year, namely, the financial year on the basis of actual production according to the compounded levy provision in all matters not yet closed and still pending before the concerned authorities.

6.7. The petition filed by the petitioners before this Court also came up for hearing with a group of similar petitions on 11th December, 2002 and came to be disposed of by a common order on the ground that Section 3A of the Act was deleted and hence, the petitions had become in fructuous. The Court, however, granted liberty to all the petitioners, including the petitioners herein, to agitate the contentions if any cause of action pursuant to the proceedings already initiated under Section 3A before its deletion accrued.

6.8. By the impugned order, the Deputy Commissioner confirmed all the five show cause notices and also imposed penalty of equal amount of the compounded levy amounts as demanded by the said show cause notices on the ground that the petitioners had not paid duties in accordance with the APC fixed by the Government, giving rise to the present petition.

7. Special Civil Application No. 6779 of 2003 :

7.1. The petitioner firm is engaged in the manufacture of manmade fabrics (processed) falling under sub-heading No. 5406 of the Central Excise Tariff Act, 1985. The textile fabrics produced by the petitioner firm were notified for the purpose of Section 3A of the Act, on 16th December, 1998 and accordingly, the Excise duty on such notified textile fabrics became leviable and recoverable on the basis of the production capacity of manufacturers/processors of textile fabrics. The Competent Authority fixed the Annual Production Capacity of the petitioner company at Rs. 1.5 lakhs per chamber per month and accordingly, the petitioner company was duly discharging its duty liability on regular basis. For the month of May, 1999 the petitioner company was required to pay an amount of Rs. 6 lakhs towards compounded levy as per the Annual Production Capacity determined by the competent authority. Therefore, on 13th May, 1999, the petitioner company as usual advised its Bankers, namely - Prime Bank Limited, Su-rat to divert an amount of Rs. 6 lakhs to the Government Account. The local Bank lodged cheque in the clearing on 15th May, 1999 and the credit was confirmed on 18th May, 1999, since intervening days were holidays for the Bank. Thus, though the instruction was given by the petitioners to Prime Bank Limited on 13th May, 1999 for diverting the funds, cheque was presented for clearance through Bank of Baroda on 15th May, 1999. Since it had come to the knowledge of the petitioners that the amount of Rs. 6 lakhs was credited by Bank of Baroda in the Govt. account only on 18th May, 1999, the petitioners by way of abundant caution also paid interest amount of Rs. 1800/- and intimated the same to the Department.

7.2. Despite this, the Superintendent of Central Excise, Range-I, Division-VI issued a Show Cause Notice bearing F.No. AR-III/SCN-96ZQ/Rita/99 dated 29th November, 1999 calling upon the petitioner company to show cause as to why penalty equal to the duty of Rs. 6,00,000/- should not be imposed under Rule 96ZQ(5)(ii) of the Rules. The petitioners filed a detailed reply on 29th December, 2000 explaining the position and informing the Deputy Commissioner-respondent No. 2 herein that the petitioners have already instructed their Bankers - Prime Co-operative Bank Ltd. on 13th May, 1999 itself for diverting the funds and the cheque was presented for clearance on 15th May, 1999 and that the amount was duly credited by the petitioners bankers in the Government account on 18th May, 1999 because of the intervening holidays. In order to substantiate their case, the petitioners also submitted copy of letter dated 17th December, 1999 received by the petitioners from Bank of Baroda, the contents of which were self-explanatory. The respondent No. 2 however, passed an Order-in-Original No. SRT-VI/ADJ-78/2001-OA dated 30th October, 2001, thereby confirming payment of interest under Rule 96ZQ(5)(i) of the Rules and imposing penalty of Rs. 6,00,000/- under Rule 96ZQ(5)(ii) of the Central Excise Rules, 1944. Being aggrieved, the petitioner has filed the present petition challenging the aforesaid order passed by the adjudicating authority.

8. During the pendency of Special Civil Applications No. 3637 of 2004 and 6779 of 2003, the petitioners therein had filed applications seeking to amend the memorandum of petitions by inserting paragraph 5A, whereby the petitioners have challenged the impugned orders on the ground that Rules 96ZO, 96ZP and 96ZQ were omitted by Notification No. 6/2001-C.E. (N.T.), dated 1st March, 2001. Vide clause (7) of this notification, these Rules were omitted without any saving clause. Section 3A of the Act was also omitted vide Section 121 of the Finance Act, 2001 which has received the assent of the President on 11th May, 2001 and thus, Section 3A of the Act stands omitted with effect from 11th May, 2001 without any saving clause. All proceedings which were pending as on 1st March, 2001 and/or 11th May, 2001 as regards the Rules 96ZO, 96ZP and 96ZQ would, therefore, automatically lapse in the absence of any saving clause for continuing the proceedings already initiated under these rules framed under Section 3A of the Act and hence, no orders could have been passed against the petitioners under these provisions, if the action against the petitioners were not finally concluded at the time of omission of these provisions.

Submissions :

9. Mr. Paresh Dave, learned advocate for the petitioners invited attention to the provisions of the Act and more particularly to Section 3 thereof to submit that Section 3 is the charging section which provides for levy and collection of duty in the manner specified therein. Section 3A came to be inserted in the Act with effect from 14th May, 1997. The said section provides that notwithstanding anything contained in Section 3, where the Central Government having regard to the nature of the process of manufacture or production of excisable goods of any specified description, the extent of evasion of duty in regard to such goods or such factors as may be relevant, is of the opinion that it is necessary to safeguard the interest of revenue, specify, by notification in the Official Gazette, such goods as notified goods and there shall be levied and collected duty of excise on such goods in accordance with the provisions of this section. In exercise of powers under Section 3A of the Act, the Central Government issued notification notifying the Hot Air Stenter Independent Textile Processor Annual Capacity Determination Rules, 1998. The goods manufactured by the petitioners came to be notified as goods on which duty was to be levied and collected as prescribed under Section 3A of the Act. Thus by a legal fiction, Section 3A became the charging event in respect of goods notified under sub-section (2) of Section 3A of the Act, The Central Government also inserted Rule 96ZQ in the Rules which lays down the procedure to be followed by an independent processor of textile fabrics and which provided for the manner in which duty was to be determined as well as paid as well as the amount of penalty and interest in case of default in payment of duty, etc. Similarly the Central Government had promulgated Rule 96ZP under Section 3A of the Act thereby providing for the procedure to be followed by the manufacturers of steel re-rolling products like the goods manufactured by the petitioners. Rule 96ZP and various other rules including the Hot Re-Rolling Steel Mills Annual Capacity Determination Rules, 1997 are framed by the Central Government in exercise of powers conferred upon it vide Section 3A read with Section 37 of the said Act.

9.1. It was submitted that Rules 96ZO, 96ZP and 96ZQ were omitted vide clause 7 of Notification No. 6/2001-C.E. (N.T.), dated 1st March, 2001 without any saving clause. Section 3A of the Act was also omitted vide Section 121 of the Finance Act, 2001 which was given assent by the Honble President on 11th May, 2001, and thus Section 3A of the Act also stands omitted with effect from 11th May, 2001 without any saving clause.

9.2. It was submitted that in view of the omission of the aforesaid provisions, all the proceedings which were pending as on 1st March, 2001 and on 11th May, 2001 under Rules 96ZO, 96ZP and 96ZQ would, therefore, automatically lapse in the absence of any saving clause for continuing proceedings already initiated under these rules framed under Section 3A of the Act, and hence, no orders could have been passed against the petitioners under these provisions, if the actions against the petitioners were not finally concluded at the time of omission of these provisions. It was pointed out that in the case of the petitioners in Special Civil Application No. 1984 of 2002, the show cause notice proposing to impose penalty and recover interest was issued on 4th October, 2001, that is, after the relevant provisions were omitted, and therefore, the very initiation of proceedings that culminated into the impugned order dated 9th November, 2001 issued on 1st January, 2002 was a nullity. Insofar as Special Civil Application No. 3637 of 2004 is concerned, the show cause notice came to be issued on 28th October, 1999, however, the impugned order came to be passed on 31st December, 2003 after the aforesaid provisions came to be omitted, and hence continuance of the proceedings after the said provisions came to be omitted was without any authority of law. Similarly in the case of the petitioners in Special Civil Application No. 6779 of 2003, the show cause notice came to be issued on 20th November, 1999, but the impugned order came to be passed on 30th October, 2001 after the aforesaid provisions came to be omitted and as such was without authority of law. In support of his submission, the learned advocate placed reliance upon the decision of this court in the case of Amit Processors Pvt. Ltd. v. Union of India and Others, : 1985 (21) E.L.T. 24 (Guj.) wherein this court while considering as to whether Rule 10 and 10A of the Central Excise Rules which came to be omitted without any saving clause, held that the court was concerned with omission of a rule and not a Central Act or Regulation and, therefore, looking to the decision of the Supreme Court in the case of M/s. Rayala Corporation (P) Ltd. v. Director of Enforcement, AIR 1970 SC 494 [LQ/SC/1969/226] , it is clear that Section 6 of the General Clauses Act cannot be pressed into service. When Section 6 of the General Clauses Act cannot be pressed into service and when there is no saving clause in the notification by which Rule 10 was omitted, it is clear that no action could have been taken in pursuance of the said notice which was issued under Rule 10 as it then existed. The court further held that an action under Rule 10 consists of two parts; one is the initiation of proceedings and the second is the conclusion of the proceedings. But before the proceedings came to be concluded, the power to conclude those proceedings disappeared from, the scene. The court, therefore, rejected the argument that once action is initiated, it can be said to be taken under Rule 10. Reliance was also placed upon the decision of this court in the case of Mahendra Mills Ltd. v. Union of India, : 1988 (36) E.L.T. 563 (Guj.) for a similar proposition of law.

9.3. It was contended that Section 6 of the General Clauses Act is applicable only when any enactment is repealed. In case of Rayala Corporation (P) Ltd. and Another v. Director of Enforcement (supra), the Supreme Court has held that Section 6 of the General Clauses Act applies to repeals and not to omissions. In case of Kolhapur Canesugar Works Ltd. v. Union of India, : 2000 (2) SCC 536 [LQ/SC/2000/218] = 2000 (119) E.L.T. 257 (S.C.) also, the Supreme Court has held that Section 6 of the General Clauses Act was not applicable in case of omission of an enactment and it was applicable only in case of repeal of an enactment.

9.4. It was argued that insofar as Rules 96ZO, 96ZP and 96ZQ of the Rules are concerned, the proceedings initiated thereunder are not saved by virtue of Section 6 of the General Clauses Act or by Section 38A of the Central Excise Act because these provisions regarding continuation of pending proceedings do not apply in case of "omission" of a rule. It was, accordingly, contended that there is no saving clause provided by the legislature while omitting these rules. Similarly, Section 6 of the General Clauses Act or Section 38A of the Act, are not applicable in case of "omission" of Section 3A also, inasmuch as this is a case of "omission" and not that of "repeal". Accordingly, proceedings pending against the petitioners under the above rules and Section 3A of the Act have lapsed and therefore, the orders passed against the petitioners under such provisions, which stood omitted without any saving clause, are wholly illegal.

9.5 It was further submitted that when Section 3A of the Act was omitted on 11th May, 2001 by virtue of Section 121 of the Finance Act, 2001, all the provisions like the rules made thereunder and the action initiated under such rules also stood lapsed. Reference was made to the decision of the Supreme Court in Air India v. Union of India, : (1995) 4 SCC 734 [LQ/SC/1995/708] , wherein it has been held that if subordinate legislation is to survive the repeal of its parent statute, the repealing statute must say so in so many words and by mentioning the title of the subordinate legislation. It was held that that when the parent provision is omitted, all the provisions like rules and regulations made thereunder, would also not survive. The learned counsel pointed out that no such provision for survival or continuation of proceedings initiated under Rules 96ZO, 96ZP and 96ZQ is made while omitting Section 3A of the Act which is the parent provision for these rules. Under the circumstances, no penalty could be imposed and no interest could be charged in case of the petitioners, because the case against the petitioners had not been brought to finality before omission of the above provisions.

9.6. The next contention raised by the learned advocate for the petitioners was that it is a settled legal position that penalty cannot be imposed merely because it is lawful to do so, because liability to pay penalty does not arise merely upon proof of default in compliance with a particular provision. Penalty would not ordinarily be imposed unless the party obliged, either acted deliberately or in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Reliance was placed upon a decision of the Supreme Court in the case of Hindustan Steel Ltd. v. State of Orissa, (1970) 25 STC 211 [LQ/SC/1969/257] = 1978 (2) E.L.T. (J159) (S.C.) for the proposition that even if a minimum penalty is prescribed, the authority competent to impose penalty would be justified in refusing to impose penalty when there was a technical or venial breach of the provisions of the Act. It was submitted that Rule 96ZQ(5)(ii) of the Rules does not leave any such discretion to the adjudicating authority, and in fact this provision takes away the discretion of the adjudicating authority and makes it obligatory on the part of the adjudicating authority to impose a penalty equal to an amount of duty outstanding from the assessee at the end of a particular month. According to the learned advocate the rule which thus, takes away discretion of an adjudicating authority and makes it obligatory on adjudicating authority to impose penalty even in the absence of any dishonest or contumacious conduct on the part of the assessee, is therefore illegal and in violation of Article 14 of the Constitution of India.

9.7. It was next submitted that Rule 96ZQ(5)(i) of the Rules provides for recovery of interest on the outstanding amount and thus, in case of default on the part of an assessee, the revenue is duly compensated by virtue of operation of this provision. Interest which is compensatory in character thus, takes care of the interest of the revenue in case an assessee commits default in making payment of the compounded levy amount within the specified period. However, penalty which is ordinarily levied on an assessee for some contumacious conduct or for a deliberate violation of the provisions of a particular statute is thus penal in character. However, penalty under Rule 96ZQ(5)(ii) of the Rules would be imposable on the assessee regardless of the facts and circumstances of such a case and thus, penalty which is penal in character is provided under this rule even without any action on the part of the assessee inviting any penal consequences. In view of the provisions of Rule 96ZQ(5)(i) which are compensatory in nature, Rule 96ZQ(5)(ii) becomes onerous and wholly unjustified. It was, accordingly, urged that this provision of Rule 96ZQ(5)(ii) which thus provides for penalty without there being any action on the part of an assessee justifying taking of any action penal in character, is therefore wholly illegal and in violation of Article 14 of the Constitution of India.

9.8. Next it was contended that there is a basic inconsistency in Rule 96ZQ(5)(ii) which shows the unreasonableness and arbitrariness underlying this provision. Rule 96ZQ(3) provides for payment of 50% of the amount by the fifteenth day of the month and the remaining amount by the end of the month. In case there is a default in paying the first installment by the 15th day of the month, no penalty under Rule 96ZQ(5)(ii) is leviable, and only interest under Rule 96ZQ(5)(i) is recovered as a compensatory measure. However, in case of default in payment of the second installment, not only compensatory measure of interest, but penalty would also be attracted, Even if the default in the payment of the first installment is of a larger period, no penalty would be imposed if the payment of the first installment was made by the end of the month, which would mean the delay of at least two weeks for the payment of the first installment. However, in case of default of even a single day in making payment of the second installment, penalty of equal amount would be imposed under Rule 96ZQ(5)(ii) of the Rules. It is thus clear that the impugned provision works unreasonably and arbitrarily even within itself and is therefore liable to be struck down as unconstitutional and illegal. Further the gross arbitrariness of this provision becomes amply clear by virtue of the fact that not only the circumstances leading to delayed payment, but even the period of delay also becomes irrelevant for imposing penalty under this provision. If there was a delay of one day in making payment of the second installment of compounded levy amount or there was a delay of a substantial period in making payment of the second installment, the amount of penalty would be the same, that is, an amount equal to the duty outstanding. Thus, this rule does not even require consideration about the period of delay or the gravity of default on the part of the concerned assessee and proposes to treat all such assessees equally. It was contended that an assessee paying the second installment after one day of the specified date and an assessee paying such amount after hundred days of the specified date cannot be treated equally, because of the simple fact that the latter case would show deliberate defiance on the part of the concerned assessee. However, the rule treats unequals as equals thereby violating Article 14 of the Constitution of India. It was, accordingly, urged that Rule 96ZQ(5)(ii) of the Rules therefore deserves to be struck down as being violative of Article 14 of the Constitution of India.

9.9. Mr. Dave further submitted that Rule 96ZQ(5)(ii) of the Rules is discriminatory in nature and therefore, it fails on the touchstone of Article 14 of the Constitution of India. It was submitted that the provisions of the Act are applicable to all the goods produced or manufactured in India. All the manufacturers of excisable goods are therefore governed by the provisions of the Act, but except the manufacturers of specified textile products, no other manufacturer of any other excisable goods is governed by a provision like Rule 96ZQ(5)(ii) of the Rules. Even the manufacturers of similar textile products, including fabrics, which are not specified under Section 3A of the Act are not governed by Rule 96ZQ(5)(ii) and are therefore, not liable for any like penalty under the Rules. It was submitted that there is no reasonable classification between manufacturers of specified textile products and manufacturers of other excisable goods and therefore, the impugned rule which subjects only the manufacturers like the petitioners to discriminatory treatment is wholly unconstitutional and liable to be struck down. Reliance was placed upon the decision of the Supreme Court in the case of State of Kerala v. Haji K. Kutty Naha, : (1969) 1 SCR 645 [LQ/SC/1968/209] , as well as in the case of Special Courts Bill, 1978, In re, : (1979) 1 SCC 380 [LQ/SC/1978/375] , wherein the court had laid down propositions applicable to cases arising under Article 14 of the Constitution. It was, inter alia, laid down that the principle underlying the guarantee of Article 14 is not that the same rules or law should be applicable to all persons within the Indian Territory or that the same remedies should be made available to them irrespective of differences of circumstances. It only means that all persons similarly circumstanced should be treated alike both in privileges conferred and liabilities imposed. Equal laws would have to be applied to all in the same situation, and there should be no discrimination between one person and another, if as regards the subject matter of the legislation their position is substantially the same.

9.10. The learned advocate further submitted that other manufacturers who were not governed under Section 3A of the Act and were thus, not subjected to Compounded Levy Scheme have been discharging their duty liabilities under Section 3 of the Act, read with the procedure prescribed under Rule 49 of the Rules. Such manufacturers are also given similar facility of payment of duty for the clearances made during the first fortnight of the month by the 20th day of that month and for the clearances made during the second fortnight of the month, by the 5th day of the succeeding month, except in cases of the clearances made during the second fortnight of March of each financial year. Under Rule 49 of the Rules, which provides similar facility to other manufacturers it is also provided that a manufacturer failing to pay the amount of duty by the due date shall be liable for interest at the rate of 24% per annum on the outstanding amount. However, no penalty at all is provided under Rule 49 in case of default in payment by such manufacturers. Thus, manufacturers of goods specified under Section 3A of the Act were subjected to harsh treatment of unreasonable penalty under Rule 96ZQ(5)(ii) compared to the other manufacturers of excisable goods. It was, accordingly, submitted that the provisions of Rule 96ZQ(5)(ii) of the Rules which mete out discriminatory treatment to the manufacturers like the petitioners is wholly unconstitutional and liable to be struck down.

9.11. Mr. Dave further submitted that Rule 96ZQ(5)(ii) is also violative of Article 19(1)(g) of the Constitution of India, as it imposes unreasonable restriction on the fundamental rights of the petitioners in conducting their business because if the petitioners have to pay substantial amount as penalty only because of a very minor delay in making payment of the duty, such a provision violates the petitioners fundamental right of conducting business without unreasonable restrictions. As has happened in various cases, the manufacturers would be liable for an astronomical amount of penalty only because of a minor delay of three/four days, which amounts to unreasonable restriction on the petitioners right to conduct business. The liability of penalty under the impugned rule is undoubtedly onerous and therefore it deserves to be struck down as violative of Article 19(1)(g) of the Constitution of India. In support of his submissions, the learned advocate placed reliance upon the decision of the Punjab & Haryana High Court in the case of Bansal Alloys & Metals Pvt. Ltd. v. Union of India, : 2010 (260) E.L.T. 343 (P & H) wherein the court has struck down Rules 96ZO, 96ZP and 96ZQ to the extent the same permit minimum penalty for delay in payment without any discretion and without having regard to extent and circumstances for delay as ultra vires the Act and the Constitution. It was submitted that the said decision would be squarely applicable to the facts of the present case and that the provision of Rule 5(ii) of Rule 96ZQ of the Rules is required to be struck down as being unconstitutional.

9.12. Reliance was also placed upon a decision of the Karnataka High Court rendered on 2nd January, 2009 in Writ Petitions No. 9689 of 2006 and other cognate matters in the case of Philips Electronics India Ltd. v. State of Karnataka, (). The decision of the Supreme Court in the case of State of Maharashtra v. Kamal S. Durgule, : (1985) 1 SCC 234 [LQ/SC/1984/318] , was also relied upon wherein the court held that classification requires division into classes which are marked by common characteristics. Such division has to be founded upon a rational basis and it must be directed at sub-serving the purposes of the statute. Reliance was also placed upon the decision of the Supreme Court in the case of New Manek Chowk Spinning & Weaving Mills v. Ahmadabad Municipality, : (1967) 2 SCR 679 [LQ/SC/1967/40] , and more particularly paragraphs 12 and 13 thereof.

9.13. The decision of the Supreme Court in the case of K.T. Moopil Nair v. State of Kerala, : (1961) 3 SCR 77 [LQ/SC/1960/334] , was cited for the proposition that Article 265 imposes a limitation on the taxing power of the State insofar as it provides that the State shall not levy or collect a tax, except by authority of law, i.e. to say, a tax cannot be levied or collected by a mere executive fiat. It has to be done by authority of law, which must mean valid law. In order that the law may be valid, the tax proposed to be levied must be within the legislative competence of the legislature imposing a tax and authorising the collection thereof and secondly, the tax must be subject to the conditions laid down in Article 13 of the Constitution. One of the conditions envisaged by Article 13(2) is that the Legislature shall not make any law which takes away or abridges the equality clause in Article 14. Referring to the provisions of Rule 37 of the Rules, it was submitted that the said rule does not empower the Central Government to levy penalty or interest on late payment of duty. It was submitted that levy of penalty being in the nature of a tax, unless expressly empowered, the Central Government could not have framed the rule levying penalty in exercise of powers under Section 37 of the Act.

9.14. Reliance was placed upon the decision of the Supreme Court in the case of Khemka and Co. (Agencies) (P) Ltd. v. State of Maharashtra, : (1975) 2 SCC 22 [LQ/SC/1975/88] for the proposition that penalty is not merely sanction. It is not merely adjunct to assessment. It is not merely consequential to assessment. It is not merely machinery. Penalty is in addition to tax and is a liability under the Act. Reliance was placed upon the decision of the Supreme Court in the case of Collector of Central Excise, Ahmadabad v. Orient Fabrics (P) Ltd., : (2004) 1 SCC 597 [LQ/SC/2003/1204] = 2003 (158) E.L.T. 545 (S.C.), wherein the court affirmed the decision of the Delhi High Court in the case of Pioneer Silk Mills Ltd. [1995 (80) E.L.T. 507 (Del.) wherein it was held that when penalty is additional tax, constitutional mandate requires a clear authority of law for imposition thereof.

9.15. Referring to Section 38A of the Act, which came to be inserted in the statute book by Section 131 of Act 14 of 2001 with effect from 28th February, 1944, it was submitted that the said section applies only in respect of rules, notifications or orders and does not apply to any section. According to the learned advocate Section 3A is the mother provision under which the other rules came to be framed. Section 3A came to be omitted in 2001 and is not saved by Section 38A of the Act. Moreover, Section 38A speaks of a rule being amended, repealed, superseded and rescinded and does not speak of omission and as such, would not be applicable to the omission of Rule 96ZQ of the Rules. Reliance was placed upon the decision of the Supreme Court in the case of General Finance Co. and Another v. Assistant Commissioner of Income Tax, Punjab, : (2002) 7 SCC 1 [LQ/SC/2002/901] = AIR 2002 SC 3126 [LQ/SC/2002/901] , wherein the court held that in the light of its earlier decisions in Rayala Corporation Pvt. Ltd. (supra) and Kolhapur Canesugar Works Ltd. (supra), the principle underlying Section 6 of the General Clauses Act as saving the right to initiate proceedings for liabilities incurred during the currency of the Act will not apply to omission of a provision in an Act but only to repeal, omission being different from repeal as held in the said decisions.

10. On the other hand, Mr. Darshan Parikh, learned Senior Standing Counsel appearing on behalf of the respondents in Special Civil Application No. 3637 of 2004 opposed the petition submitting that while omitting Rules 96ZQ, 96ZP and 96ZO from the Central Excise Rules, 1944, the legislature has introduced Section 38A in the Act with retrospective effect from 28th February, 1944. It was submitted that Section 38A saves all actions under the above referred rules. Initially, the petitioners were liable to pay duty under Section 3 of the Act. Subsequently, in view of the insertion of Section 3A in the Act, the petitioners became liable to pay duty under the said provision. In the circumstances, the petitioners are liable to pay duty either under Section 3 or Section 3A of the Act. Merely because Section 3A is obliterated, their liability to pay duty does not go away. This cannot be the intention of the legislation. It was submitted that even under Rule 96ZQ of the Rules, under sub-rule (4) thereof, the assessee was required to maintain all records and as such it is always possible to assess the petitioners liability under Section 3 of the Act. It was submitted that there is no provision under the Act under which the assessee can go scot-free without payment of duty. The attention of the court was drawn to the decision of the Supreme Court in the case of Union of India v. Supreme Steels and General Mills, : 2001 (133) E.L.T. 513 (S.C.), to submit that in the facts of the said case, the vires of Rule 96ZO of the rules had been challenged on the ground that it is inconsistent with the provisions of the Act. The Supreme Court in the facts of the said case observed that the scheme had since been dropped. The court disposed of the bunch of cases comprising of civil appeals, special leave petitions and writ petitions relating to charge of excise duty on notified goods on the basis of capacity of production, as introduced by Section3A of the Act, by holding that no dispute thus remained on the point and the excise duty shall accordingly be assessed in respect of matters not yet closed and still pending before the concerned authorities. It was submitted that in the light of the aforesaid decision of the Supreme Court, it is not open for the petitioners to contend that the liability of the petitioners to pay duty stands totally obliterated in view of the omission of Rule 96ZQ of the Rules and Section 3A of the Act. According to the learned counsel, considering the knowledge or the information given to the court regarding the provision which was no more on the statute book, the Supreme Court thought it appropriate to direct the parties to go before the appropriate authority in all pending cases. This would mean that the Supreme Court considered those provisions for removal of the section and rules and was of the opinion that despite that the matters should be decided.

10.1. The attention of the court was drawn to paragraph 3.9 of Special Civil Application No. 3637/2004 wherein the petitioner has submitted that during the pendency of the show-cause notice, the Supreme Court had decided the controversy about Section 3A and the compounded levy thereon in the case of Union of India v. Supreme Steels and General Mills Ltd. It was submitted that it was the case of the petitioner that in view of the directions of the Supreme Court, the concerned authority seized of the adjudication of the show-cause notices issued to the petitioners was also duty bound to assess the duties on actual production, and not on the basis of production capacity determined for the factory. Hence, the above referred averments made in the petition indicate that the petitioner is also very clear as regards the decision in the case of Supreme Steels and General Mills Ltd. and the applicability of the same to the facts of the present case.

10.2. Attention was invited to Section 132 of the Finance Act, 2001 which makes provision for "Validation of certain action taken" to submit that in view of the said provision, everything done under the old provision is saved. Referring to Notification 6/2001- dated 1st March, 2001 whereby Rule 96ZO, Rule 96ZP and Rule 96ZQ came to be omitted, it was submitted that the said notification amends the Central Excise Rules, 1944 and saves all things, actions done prior to the amendment. Strong reliance was placed upon the decision of the Larger Bench of the Tribunal in the case of Surana Metals & Steels (I) Ltd. v. Commissioner of Central Excise, Chennai, 2007 (216) E.L.T. 24 (Tri.- LB) wherein the Tribunal has held that Rule 96ZQ and Rule 96ZP came to be omitted by Rule 7 of the Central Excise (Third Amendment) Rules, 2001 which were notified on 1st March, 2001 by Notification No. 6/2001-C.E. (NX). As stated in the preamble of the notification, these rules were made under Section 37 of the Central Excise Act by the Central Government, "further to amend the Central Excise Rules, 1944, except as respects things done or omitted to be done before such amendment". The Tribunal held that the amendment was done by way of, inter alia, omitting Rules 96ZO and 96ZP while simultaneously providing a saving clause by incorporating the expression "except as respects things done or omitted to be done before such amendment". The Tribunal further held that there cannot be a greater all pervasive saving clause than Section 38A. When, admittedly, the obligations and liabilities were incurred under Rules 96ZO and 96ZP, during their currency when Section 3A was still in force, amendments by omission, repeal etc. contemplated by Section 38A did not affect such liabilities, and the investigation, legal proceeding or remedies in respect thereof were all saved. The Tribunal further held that the liabilities were admittedly incurred by the appellants under Rules 96ZO and 96ZP while Section 3A was in force. The subsequent omission of Section 3A from 11th May, 2001 did not obliterate the obligations and liabilities which had already arisen under the rules and were saved because of the saving provisions contained in Section 38A of the Act. The obligations and liabilities had arisen under the said rules as contemplated by Section 3A when it was in force and those very obligations and liabilities subsisted by virtue of the saving provision of Section 38A which was simultaneously introduced while omitting Section 3A. The omission of Section 3A was not done with any retrospective effect and therefore liabilities that had already arisen under the said rules could be enforced by virtue of Section 38A of the Act. It was submitted that the view taken by the Tribunal is the correct view and that all obligations and liabilities incurred under Rule 96ZQ, Rule 96ZO and Rule 96ZP are saved by the provisions of Section 38A of the Act.

10.3. In support of his submissions, the learned counsel placed reliance upon the decision of the Supreme Court in the case of Commissioner of Central Excise and Customs v. Venus Castings (P) Ltd., : 2000 (117) E.L.T. 273 (S.C.). Reliance was also placed upon the decision of the Punjab & Haryana High Court in the case of Shree Bhagwati Steel Rolling Mills v. Commissioner of Central Excise, Chandigarh, : 2007 (207) E.L.T. 58 (P&H), wherein while deciding a similar controversy, the court held that even by omission of Section 3A, the liability of the assessee thereunder was not wiped out. It was submitted that the said decision of the Punjab & Haryana High Court would be directly applicable to the facts of the present case. In conclusion, it was submitted that the interpretation as put forth by the petitioners would result in a situation whereby though there is a liability to pay duty, the petitioners would go scot-free without payment of any duty which could never be the intention of the Legislature.

10.4. Mr. Parikh further submitted that the use of any particular form of expression is not necessary to bring about a repeal. It is a matter of legislative practice to provide by enacting an amendment that an existing provision shall be omitted; that such omission has the effect of repeal of the existing provision, and that such law may also provide for introduction of a new provision. It was urged that viewed from that angle, there may be no real distinction between "repeal" or "omission"; that what is required is that the words used show an intention to abrogate the Act or provision in question. The Legislature adopts different forms for the same; that the usual form is to use the words "is hereby repealed" and thereafter enumerate the Acts sought to be repealed or put them a schedule; that sometimes the words "shall cease to have effect" are used; that when the object of repeal affects only a part of the Act, the words "shall be omitted" are used; that omission and repeal have identical effect in operation of statutes. Adverting to the provisions of Section 6A of the General Clauses Act in which it is stated that if any Act repeals any enactment making textual amendment in the Act by express omission, insertion or substitution of any matter, then, unless a different intention appears, the repeal shall not affect the continuance of such amendment made by an enactment so repealed and in operation at the time of such repeal; that the use of the words "repeals by express omission, insertion or substitution" will cover different aspects of repeal; that this is a further legislative indication that "omission" also amounts to a "repeal" of an enactment. Reliance was placed upon the decision of the Supreme Court in the case of General Finance Co. and Another v. Assistant Commissioner of Income Tax, Punjab, (2002) 7 SCC 1 [LQ/SC/2002/901] , wherein the court had found force in the aforesaid submissions advanced by the learned counsel for the appellant therein.

11. Mr. Y. N. Ravani, learned Senior Standing Counsel appearing on behalf of the respondents in Special Civil Application No. 1984 of 2002 reiterated the submissions advanced by Mr. Darshan Parikh. It was further submitted that the contention as regards lapsing of the above referred provisions not having been taken at the inception; the petitioners may not be permitted to raise the same. Referring to the reliefs claimed in the petition, it was submitted that the petitioners have challenged the impugned orders only to the extent the same levy penalty; hence, it is now not open to the petitioners to contend that the entire order is bad on the ground of lapsing of the aforesaid provisions. Inviting attention to the earlier order passed by this court disposing of the petition, it was pointed out that the court had interfered only with the penalty part of the order by observing that the remaining portions are not interfered with, for the simple reason that the petitioners have preferred appeals for challenging the other portions of the orders levying duty and interest.

11.1. The learned counsel invited attention to the decision of the Supreme Court in the case of Union of India v. Krishna Processors (supra) to submit that the Supreme Court has remitted the matter for deciding the question of vires of clause (ii) of sub-rule (5) of Rule 96ZQ of the Act. It was submitted that the scope of the petition cannot be enlarged beyond what was remitted to the High Court. In the circumstances, the petitioners cannot be permitted to raise the contention regarding lapsing of provisions at this stage. Inviting attention to the relief claimed in the petition, it was pointed out that petitioners have only challenged the impugned order-in-original to the extent penalty is imposed under Rule 96ZQ(5)(ii) of the Rules. Rule 96ZQ is part of the Central Excise Rules. The Central Excise Rules are still in existence and are framed in exercise of powers under Section 37 and not Section 3A of the Act. Accordingly the power of enactment prescribed under Section 37 of the Central Excise Act, has its independent existence irrespective of Section 3A of the Act.

11.2. On the question of validity of Rule 96ZQ of the Rules, Mr. Ravani invited attention to the decision of the Supreme Court in the case of Union of India v. Dharamendra Textile Processors, 2008 (231) E.L.T. 3 (S.C.), and more particularly to paragraph 25 thereof wherein the Supreme Court has held that wilful concealment is not an essential ingredient for attracting civil liability as is the case in the matter of prosecution under Section 276C of the Income-tax Act. It was submitted that penalty is a civil liability and as such, penalty can be imposed for loss of revenue and wilful and intentional delay is not necessary. Reliance was also placed upon the decision of the Supreme Court in Commissioner of Income-tax, Delhi v. Atul Mohan Bindal, : (2009) 9 SCC 589 [LQ/SC/2009/1726] , wherein it has been held that the decision in Dharamendra Textile (supra) must be understood to mean that though the application of Section 11AC would depend upon the existence or otherwise of the conditions expressly stated in the Section, once the Section is applicable in a case the authority concerned would have no discretion in quantifying the amount and penalty must be imposed equal to the duty determined under sub-section (2) of Section 11A.

11.3. It was pointed out that Section 3A of the Act is a special provision and provides for a different procedure than Section 3 of the Act which is the charging provision. Under Section 3A of the Act which is intended to charge duty on the basis of annual production capacity, the important aspect is that the same involves pre-determination of duty whereas in other cases, the liability arises on manufacture. It was submitted that under Section 3 of the Act, the assessee does not know what will be the liability in advance whereas in case of Section 3A of the Act, the assessee knows his liability well in advance. Rule 96ZQ has been framed keeping in mind this aspect. According to the learned counsel, Rule 96ZQ applies uniformly to those to whom Section 3A applies, viz., independent textile processors who are a class by themselves. Hence, there is no discrimination on the basis of such classification.

11.4. Mr. Ravani further submitted that the penalty cannot be said to be invalid on the ground of different periods for payment of duty. The defaulter is a class by himself. In the circumstances not providing separate penalties for different defaulters would not make the penalty bad. It was submitted that the contention put forth by the petitioners creates an absurdity because lesser penalty for lesser period would encourage defaulters. Deterrence would have vanished though the prescribed period is known to the assessee. It was submitted that in the decisions relied upon by the petitioners in the context of tax liability, the court found that in the absence of valid classification, the provision is ultra vires. It was submitted that Section 3A of the Act is based upon a valid classification and imposition of penalty cannot be compared to liability to tax as imposition of penalty is different. The object is that the defaulter and the assessee cannot be put in the same class.

11.5. It was further submitted that the compensatory aspect of imposing interest for delayed payment cannot be a ground for non-levy of penalty. Referring to the decision of this High Court in the case of Ambuja Synthetic Mills v. Un-ion of India, 2004 (175) E.L.T. 85 (Guj.), and more particularly paragraph 5 thereof, it was submitted that this aspect of the matter stands concluded by this court in the said decision wherein it is held that on reading clause (i) of sub-rule (5) of Rule 96ZQ, it appears that 36% interest per annum is imposed as compensatory measure as the Revenue suffered loss on account of non-payment of revenue. At the same time, with a view to see that there is deterrent effect on the tax payers, it is also thought fit to impose penalty so that the amount which the Revenue is entitled to collect is paid by an assessee in time and the Government is not required to face any hardship. If the amount is not paid, it becomes difficult for the Government to run the administration. Therefore, this provision is to be invoked when the revenue is not paid by the assessee in time. The aforesaid two clauses operate in different fields and it is known that compensatory measures as well as measures for deterrent effect can be provided. The court found no difficulty in arriving at the conclusion that it is not possible to provide compensatory measures as well as measures which would deter the assessees. It was submitted that it is settled legal position that while considering the validity of a statutory provision the presumption is always in favour of its constitutionality. It was submitted that Section 3A of the Act was brought on the statute book with an intention to collect tax on production basis and to collect the same within time. The said provision was enacted in the interest of the revenue. It was intended to avoid a situation of evasion of tax and to provide timely collection of duty. Both purposes can be achieved by imposing penalty to create deterrence for committing default and therefore provision for imposition of penalty has a direct nexus with enacting Section 3A of the Act. It was submitted that this court in the case of Ambuja Synthetic Mills v. Union of India (supra) has verified the scheme and found it valid. Reliance was also placed upon the decision of the Supreme Court in the case of Assistant Collector of Central Excise v. Ramakrishnan Kulwant Rai, : 1989 (41) E.L.T. 3 (S.C.).

11.6. In so far as Section 37 of the Act is concerned, each sub-section is required to be applied independently. It was submitted that the sub-section (1) prevails over the subsequent sub-sections. Under sub-section (1) of Section 37 the Central Government is empowered to make rules to carry into effect the purposes of this Act and as such can frame any rule for this purpose. According to the learned counsel the clauses contained in sub-section (2) of Section 37 are enumerative and not exhaustive. It was submitted that sub-section (3) of Section 37 is an enabling provision and does not debar the Central Government from levying higher penalty.

11.7. It was further submitted that the scheme under Section 3A of the Act is itself unique. Reliance was placed upon the decision of the Supreme Court in the case of Hans Steel Rolling Mill v. Commissioner of Central Excise, Chandigarh, : (2011) 3 SCC 748 [LQ/SC/2011/387] = 2011 (265) E.L.T. 321, wherein it has been held that the compounded levy scheme for collection of duty for annual capacity of production under Section 3A of the Act and Hot Re-rolling Steel Mills Annual Capacity Determination Rules, 1997 is a separate scheme from the normal scheme for collection of central excise duty on goods manufactured in the country. This is a comprehensive scheme in itself and general provisions in the Act and the Rules are excluded. It was submitted that the scheme is a unique scheme not comparable with the scheme of Section 3 and that the aspect of penalty under Section 3 and Section 3A of the Act cannot be compared. It was argued that, therefore, reliance placed on any aspect of normal recovery and penalty provisions is misconceived in respect of recovery and penalty provisions under the special scheme under Section 3A of the Act. According to the learned counsel, the regular scheme for recovery of tax and imposition of penalty is different from the scheme under Section 3A of the Act and that there are different means for levy of penalty. In the circumstances, the provisions of Rule 96ZQ(5) (ii) of the Act are not violative of Article 14 or of any other provision of the Constitution or the Act and as such, deserve to be sustained.

12. Mr. R. J. Oza, learned Senior Standing Counsel, appearing on behalf of the respondents in Special Civil Application 6779 of 2003 adopted the submissions advanced by Mr. Darshan Parikh.

13. In rejoinder, Mr. Paresh Dave, learned advocate for the petitioners submitted that in the case of Union of India v. Supreme Steels and General Mills (supra) the issue of proceedings continuing or not had not been raised, considered or decided by the Supreme Court. It was a direction on consensus. It was submitted that it was a sort of a consent decree and as such, the same is not a decision binding as an authority, In support of his submission, the learned advocate placed reliance upon the decision of the Supreme Court in the case of Kulwant Kaur v. Gurdial Singh Mann, : (2001) 4 SCC 262 [LQ/SC/2001/758] , wherein the court held that concession, if made and in the event the court proceeds on the basis of such a concession, the decision cannot by any stretch be termed as a binding precedent. The court in the facts of the said case held that the previous decision did not and cannot have the sanctity and solemnity of a binding precedent. The decision of the Supreme Court in the case of Municipal Corporation of Delhi v. Gurnam Kaur, : (1989) 1 SCC 101 [LQ/SC/1988/456] , was cited for the proposition that when a direction or order is made by consent of the parties, the court does not adjudicate upon the rights of the parties nor does it lay down any principle. Quotability as Taw" applies to the principle of a case, its ratio decidendi. The only thing in a judges decision binding as an authority upon a subsequent judge is the principle upon which the case was decided. Statements which are not part of the ratio decidendi are distinguished as obiter dicta and are not authoritative. It was submitted that the decision of the Supreme Court was delivered without argument, without reference to the relevant provisions of the Act and the Rules and as such, the same cannot be treated to be a binding precedent insofar as the transaction involved in the present case is concerned. Reliance was also placed upon the decision of the Supreme Court in the case of Zee Telefilms Ltd. v. Union of India, : (2005) 4 SCC 649 [LQ/SC/2005/123] , for the proposition that when questions raised were neither canvassed nor was there any necessity therefore in the earlier decision, the same cannot be treated as a binding precedent within the meaning of Article 141 of the Constitution, having been rendered in a completely different situation. The decision of the Supreme Court in the case of Divisional Controller, KSRTC v. Mahadeva Shetty, : (2003) 7 SCC 197 [LQ/SC/2003/730] , was cited for the proposition that while applying a decision to a later case, the court dealing with it should carefully try to ascertain the principle laid down by the previous decision. The decision often takes its colour from the question involved in the case in which it is rendered. The scope and authority of a precedent should never be expanded unnecessarily beyond the needs of a given situation. It was submitted that in the circumstances, the decision of the Supreme Court in the case of Union of India v. Supreme Steels and General Mills (supra) cannot be treated as a binding precedent to the issue involved in the present case.

13.1. Next it was submitted that the assessees who are manufacturers of excisable goods are sought to be distinguished on the basis of liability being predetermined, by contending that provision for taxes and penalties under the scheme of Section 3A and Section 3 of the Act would be different. It was contended that pre-determining of liability is not a relevant consideration for imposition of penalty. It was argued that even otherwise, the statement is factually incorrect. Attention was invited to the provisions of Rule 173G of the Rules which lays down the procedure to be followed by the assessee in the normal course. It was submitted that under sub-rule (1) of Rule 96ZQ, goods and rates are specified whereas sub-rule (3) provides for payment of 50% of the duty by 15th and the remaining by the end of the month. Under the normal scheme, Chapter 7A of the Rules provides for removal of excisable goods on determination of duty by producers, manufacturers or private warehouse licensees. Attention was invited to the notification issued in exercise of powers conferred by Rule 173A of the Rules specifying the goods to which the provisions of sub-rule (1) of Chapter 7A of the Rules shall apply. It was pointed out that most of the goods are covered under Chapter 7A and that all goods except cigarettes have been brought under the self-removal procedure. Attention was invited to Rule 173B of the Rules and Rule 173F of the Rules to submit that even under the regular procedure, the duty has to be paid prior to removal of the goods. Referring to Rule 173Q of the Rules which provide for confiscation and penalty, it was submitted that all clauses refer to some deception or wilful action on the part of the assessee. Except for rate of duty which is on actual production under Section 3 of the Act and rate of duty being on annual production capacity under Section 3A of the Act, nothing is different in the procedure to be followed for payment of duty and its charging liability etc. under the Act. Assessees under Section 3 and Section 3A are not a different class except for the limited purpose namely, the manner in which the liability is determined viz. on actual production and on annual production capacity. It was submitted that penalty partakes character of tax or is in the nature of a tax. Reliance was placed upon the decision of the Supreme Court in the case of Collector of Central Excise, Ahmadabad v. Orient Fabrics Ltd., : 2003 (158) E.L.T. 545 and more particularly paragraph 17 thereof for the proposition that levy of penalty which is an additional tax has to be under the authority of law which should be clear, specific and explicit. It was submitted that accordingly the principle of reasonable classification of assessees is applicable even in cases of penalty, and that in any case on mere ipse dixit, penalty cannot be imposed to the extent Government thinks fit. It was argued that the only basis for revenue to levy the penalty is that Section 3A of the Act is a unique scheme. According to the learned advocate not providing for different penalties based on length of delay is absurd and not vice versa. It was submitted that length of delay is a very relevant factor as the same shows the intention of the assessee. It was submitted that there may be genuine reasons for short delay whereas long delay would normally lack bona fide. The aforesaid aspect has been lost sight of by the Government while framing rules. It was submitted that no attempt has been made to show as to why there is no penalty for delay qua the first fortnight and that there is no rationale behind not levying any penalty for any delay that may occur for a period of 15 days from the end of the first fortnight to the end of the month.

13.2. Dealing with the contention that Ambuja Synthetic Mills v. Union of India (supra) concludes the issue, it was submitted that in the said case the court never dealt with the aspect of vires of Rule 96ZQ and the rule was read down. It was further submitted that the decision of this court in Ambuja Synthetic Mills v. Union of India has been quashed and set aside in the case of Dharamendra Textile Processors and as such, no reliance can be placed upon the same by the Revenue. Reliance was placed upon the decision of this High Court in the case of Satellite Engineering Ltd. v. Assistant Collector of Central Excise, : 1992 (58) E.L.T. 503 (Guj.), for the proposition that once a decision is reversed and set aside, it is immaterial on which point the decision is reversed because on reversion of the decision, it ceases to be a good decision in the eye of law. As regards the decision of the Punjab & Haryana High Court in the case of Shree Bhagwati Steel Rolling Mills (supra) it was pointed out that in the said decision the court had observed that the decision of the Supreme Court in Kolhapur Canesugar was in respect of a temporary statute which is an incorrect fact, and as such there is a complete misreading of the said decision. It was submitted that the said decision was contrary to the decision of the Supreme Court in Kolhapur Canesugar (supra). According to the learned advocate the Central Excise Act, 1944 and the rules framed thereunder are never temporary and that Section 38A has been relied upon incorrectly. In the circumstances, no reliance can be placed upon the said decision. Discussion :

14. In the background of the facts and contentions noted hereinabove, the court is called upon to decide as to :