"Page 1\nJUDGMENT\n REPORTABLE\nIN THE SUPREME COURT OF INDIA\nCIVIL APPELLATE JURISDICTION\nCIVIL APPEAL NO.4280 OF 2007\nM/S. SHREE BHAGWATI STEEL \nROLLING MILLS\n…APPELLANT\nVERSUS\nCOMMISSIONER OF CENTRAL EXCISE \n& ANR.\n…RESPONDENTS\nWITH\nCIVIL APPEAL NO.4281 OF 2007\nCIVIL APPEAL NO.4282 OF 2007\nCIVIL APPEAL NO.3031 OF 2008\nCIVIL APPEAL NO.13601 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.22134 OF 2008)\nCIVIL APPEAL NO.4379 OF 2010\nCIVIL APPEAL NO.13602 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.11030 OF 2010)\nCIVIL APPEAL NO.908 OF 2011\nCIVIL APPEAL NO.5448 OF 2011\nCIVIL APPEAL NO.5449 OF 2011\nCIVIL APPEAL NO.5452 OF 2011\nCIVIL APPEAL NO.5453 OF 2011\nCIVIL APPEAL NO.13603 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.5532 OF 2011)\nCIVIL APPEAL NOS.8685-8686 OF 2011\nCIVIL APPEAL NO.13605 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.19964 OF 2011)\nCIVIL APPEAL NO.13606 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.19966 OF 2011)\nCIVIL APPEAL NO.13607 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.19968 OF 2011)\n1\n\nPage 2\nJUDGMENT\nCIVIL APPEAL NO.13608 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.19969 OF 2011)\nCIVIL APPEAL NO.13609 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.19972 OF 2011)\nCIVIL APPEAL NO.13610 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.19975 OF 2011)\nCIVIL APPEAL NO.13611 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.19979 OF 2011)\nCIVIL APPEAL NO.13612 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.19983 OF 2011)\nCIVIL APPEAL NO.13614 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.20667 OF 2011)\nCIVIL APPEAL NO.13615 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.21584 OF 2011)\nCIVIL APPEAL NO.13616 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.25881 OF 2011)\nCIVIL APPEAL NO.13617 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.1796 OF 2012)\nCIVIL APPEAL NO.13618 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.16249 OF 2012)\nCIVIL APPEAL NO.13619 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.21273 OF 2012)\nCIVIL APPEAL NO.13620 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.21402 OF 2012)\nCIVIL APPEAL NO.13621 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.24139 OF 2012)\nCIVIL APPEAL NO.13622 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.27752 OF 2012)\nCIVIL APPEAL NO.13623 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.37566 OF 2012)\nCIVIL APPEAL NO.13624 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.38588 OF 2012)\nCIVIL APPEAL NO.13625 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.39972 OF 2012)\nCIVIL APPEAL NOS.13626-13627 OF 2015\n(ARISING OUT OF SLP (CIVIL) NOS.1103-1104 OF 2013)\nCIVIL APPEAL NO.13628 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.4224 OF 2013)\nCIVIL APPEAL NO.13629 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.5877 OF 2013)\n2\n\nPage 3\nJUDGMENT\nCIVIL APPEAL NO.13630 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.7852 OF 2013)\nCIVIL APPEAL NO.13631 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.9796 OF 2013)\nCIVIL APPEAL NO.13632 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.11709 OF 2013)\nCIVIL APPEAL NO.13633 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.14097 OF 2013)\nCIVIL APPEAL NO.13634 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.17534 OF 2013)\nCIVIL APPEAL NO.13635 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.18902 OF 2013)\nCIVIL APPEAL NO.13636 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.21590 OF 2013)\nCIVIL APPEAL NOS.13637-13638 OF 2015\n(ARISING OUT OF SLP (CIVIL) NOS.27235-27236 OF 2013)\nCIVIL APPEAL NO.13639 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.29566 OF 2013)\nCIVIL APPEAL NO.13640 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.1269 OF 2014)\nCIVIL APPEAL NO. 1979 OF 2014\nCIVIL APPEAL NOS.13641-13642 OF 2015\n(ARISING OUT OF SLP (CIVIL) NOS.4511-4512 OF 2014)\nCIVIL APPEAL NO.13643 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.20044 OF 2014)\nCIVIL APPEAL NO.13644 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.23009 OF 2014)\nCIVIL APPEAL NO.13645 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.26042 OF 2014)\nCIVIL APPEAL NO.13646 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.26036 OF 2014)\nCIVIL APPEAL NO.13647 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.30377 OF 2014)\nCIVIL APPEAL NO.13648 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.30378 OF 2014)\nCIVIL APPEAL NO.13649 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.30376 OF 2014)\nCIVIL APPEAL NO.13650 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.31332 OF 2014)\n3\n\nPage 4\nJUDGMENT\nCIVIL APPEAL NO.13651 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.36410 OF 2014)\nCIVIL APPEAL NO.13652 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.36196 OF 2014)\nCIVIL APPEAL NO.13653 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.36658 OF 2014)\nCIVIL APPEAL NO.13654 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.36408 OF 2014)\nCIVIL APPEAL NO.13655 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.36413 OF 2014)\nCIVIL APPEAL NO.13656 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.3486 OF 2015)\nCIVIL APPEAL NO.13657 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.6147 OF 2015)\nCIVIL APPEAL NO.13658 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.7820 OF 2015)\nCIVIL APPEAL NO.13659 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.33041 OF 2013)\nCIVIL APPEAL NO.13660 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.8746 OF 2015)\nCIVIL APPEAL NO.13661 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.10577 OF 2015)\nCIVIL APPEAL NO.13662 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.12574 OF 2015)\nCIVIL APPEAL NO.13663 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.21407 OF 2015)\nCIVIL APPEAL NO.13664 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.22354 OF 2015)\nCIVIL APPEAL NO.13665 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.27474 OF 2015)\nCIVIL APPEAL NO.13666 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.26580 OF 2015)\nCIVIL APPEAL NO.13667 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.27998 OF 2015)\nCIVIL APPEAL NO.13668 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.28262 OF 2015)\nCIVIL APPEAL NO.13669 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.27471 OF 2015)\nCIVIL APPEAL NO.13670 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.27997 OF 2015)\n4\n\nPage 5\nJUDGMENT\nCIVIL APPEAL NO.13671 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.28264 OF 2015)\nCIVIL APPEAL NO.13672 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.28935 OF 2015)\nCIVIL APPEAL NO.13673 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.29004 OF 2015)\nCIVIL APPEAL NO.13674 OF 2015\n(ARISING OUT OF SLP (CIVIL) NO.19948 OF 2011)\nJ U D G M E N T\nR.F. Nariman, J.\n1.\nLeave granted.\n2.\nThis batch of appeals raises questions relating to the \ndemand for interest and penalty under Rules 96ZO, 96 ZP and \n96 ZQ of the Central Excise Rules, 1994, which were framed in \norder to effectuate the provisions contained in Section 3A of the \nCentral Excise Act, 1994. Several High Courts have struck \ndown the said Rules relating to penalty as being ultra vires the \nparent provision and violative of Articles 14 and 19(1)(g) of the \nConstitution. Most of the appeals in this batch are, therefore, \nby the Union of India. However, before dealing with the said \nappeals, it is necessary to first segregate Civil Appeal No.4280 \nof 2007 which raises a slightly different question from the \nquestions raised in the other appeals and decide it first. \n5\n\nPage 6\nJUDGMENT\n3. \nThe question which arises for decision in the said appeal \nis the demand, by means of a letter dated 19.8.2005, for \npayment of interest for delayed payment of central excise duty \nunder Section 3A of the Central Excise Act, 1944. \n4.\nThe case of the appellant is that it took a rolling mill on \nlease for the period from 1997 to 2000 and manufactured \nrerolled non-alloyed steel products. On 1.9.1997 the \ncompounded levy scheme was introduced by way of insertion \nof Section 3A of the Central Excise Act. The appellant opted \nfor the aforesaid scheme under Rule 96ZP of the Central \nExcise Rules. When the lease expired, the appellant \nsurrendered its registration certificate on 1.6.2000. As stated \nhereinabove, on 19.8.2005 the impugned notice was issued to \nthe appellant demanding interest for delayed payment of duty \nfor the period 1997 to 2000. \n5.\nThe High Court framed two questions which arose for its \nconsideration: (1) whether “omission” of the compounded levy \nscheme in 2001 wipes out the liability of the assessee for the \nperiod during which the scheme was in operation, and (2) \n6\n\nPage 7\nJUDGMENT\nwhether the letter of demand of interest for delayed payment \nwas liable to be set aside on the ground of delay. \n6.\nThe High Court found, after distinguishing some of the \njudgments of this Court, and after relying upon Section 38A of \nthe Central Excise Act, which was added vide Section 131 of \nthe Finance Act, 2001, that on omission of Section 3A, the \nliability of the assessee was not wiped out. \n7.\nShri Ajay Aggarwal, learned counsel who appeared on \nbehalf of the appellant fairly submitted that a recent judgment \ndelivered by this Bench, namely, M/s Fibre Boards (P) Ltd., \nBangalore v. Commissioner of Income Tax, Bangalore, \n[2015] 376 ITR 596 (SC), would cover the matter before us \nbeing directly against the appellant’s case. However, he \nsubmitted that for various reasons this judgment requires a \nrelook and ought to be referred to a larger Bench of three \nJudges. Shri Aggarwal argued the matter with great ability and \nwe listened to him with considerable interest. \n8.\nFirst, it may be stated that the judgment of this Court in \nthe Fibre Board’s case has taken the view that an “omission” \n7\n\nPage 8\nJUDGMENT\nwould amount to a “repeal”, after referring to several authorities \nof this Court, G.P. Singh’s Principles of Statutory Interpretation, \nSection 6A of the General Clauses Act, 1897, and a passage in \nHalsbury’s Laws of England. Ultimately, this Court arrived at \nthe conclusion that an “omission” would amount to a “repeal” for \nthe purpose of Section 24 of the General Clauses Act. Since \nthe same expression, namely, “repeal” is used both in Section 6 \nand Section 24 of the General Clauses Act, the construction of \nthe said expression in both sections would, therefore, include \nwithin it “omissions” made by the legislature. \n9.\nShri Aggarwal, however, argued that there is a \nfundamental distinction between a “repeal” and an “omission” in \nthat in the case of a “repeal” the statute is obliterated from the \nvery beginning whereas in the case of an “omission” what gets \nomitted is only from the date of “omission” and not before. This \nbeing the case, it is clear that things already done in the case of \nan “omission” would be saved. However, a “repeal” without a \nsavings clause like Section 6 of the General Clauses Act would \nnot so save things already done under the repealed statute. He \nfurther argued that Section 6A which was relied upon by the \n8\n\nPage 9\nJUDGMENT\nBench in the Fibre Board’s case did not state that an “omission” \nwould be included within the expression “repeal”, but that if \nSection 6A were carefully read, an “omission” would only be \nincluded in an “amendment” which, under the Section, can be \nby way of omission, insertion or substitution. Therefore, it is \nfallacious to state that Section 6A would lead to the conclusion \nthat “omissions” are included in “repeals”. He further argued \nthat in any event, the true ratio decidendi of the Constitution \nBench decision in Rayala Corporation (P) Ltd. & Ors. v. \nDirector of Enforcement, New Delhi, 1969 (2) SCC 412, is \nthat an “omission” cannot amount to a “repeal” inasmuch as the \nfirst reason given for distinguishing the Madhya Pradesh High \nCourt’s judgment in that case was that Section 6 cannot apply \nto the omission of a rule because an “omission” is not a \n“repeal”. He further argued that as the Madhya Pradesh High \nCourt’s decision was put forward by the respondent in that case \nin support of their argument, the Constitution Bench’s dealing \nwith the said decision in order to overcome it would necessarily \nbe the ratio decidendi of the said decision, and being a \nConstitution Bench decision, would be binding upon this Bench. \n9\n\nPage 10\nJUDGMENT\nHe further referred to Section 31 of the Prevention of Corruption \nAct, 1988, which, in his opinion, makes it clear that Parliament \nitself has understood that a repeal under Section 6 of the \nGeneral Clauses Act would not apply to omissions. He has \nfurther argued that it may be true that the expression “repeal” is \nnormally used when an entire statute is done away with, as \nopposed to an “omission” which is applied only when part of the \nstatute is deleted, but said that this is not invariably the case, \nand referred to Section 1 of the Indian Contract Act in which \nenactments mentioned in the schedule are repealed not in their \nentirety but only to the extent provided and, therefore, argued \nthat the expression “repeals” will apply also to a part of an \nenactment as opposed to the enactment as a whole. \n10.\nShri Radhakrishnan, learned senior counsel appearing on \nbehalf of the revenue supported the judgment of this Court in \nthe Fibre Board’s case and said that recent judgments \ndelivered which have clarified the law ought not to be disturbed \nin the larger public interest. \n11.\nSince Shri Aggarwal has made detailed submissions on \nwhy according to him the judgment in the Fibre Board’s case is \n10\n\nPage 11\nJUDGMENT\nnot correctly decided, we propose to deal with each of those \nsubmissions in some detail. \n12.\nFirst and foremost, it is important to refer to the definition \nof “enactment” contained in Section 3(19) of the General \nClauses Act. The said definition clause states that “enactment” \nshall mean the following:- \n“enactment\" shall include a Regulation (as \nhereinafter defined) and any Regulation of the \nBengal, Madras or Bombay Code, and shall also \ninclude any provision contained in any Act or in any \nsuch Regulation as aforesaid.”\n13.\nFrom this it is clear that when Section 6 speaks of the \nrepeal of any enactment, it refers not merely to the enactment \nas a whole but also to any provision contained in any Act. \nThus, it is clear that if a part of a statute is deleted, Section 6 \nwould nonetheless apply. Secondly, it is clear, as has been \nstated by referring to a passage in Halsbury’s Laws of England \nin the Fibre Board’s judgment, that the expression “omission” is \nnothing but a particular form of words evincing an intention to \nabrogate an enactment or portion thereof. This is made further \nclear by the Legal Thesaurus (Deluxe Edition) by William C \n11\n\nPage 12\nJUDGMENT\nBurton, 1979 Edition. The expression “delete” is defined by the \nThesaurus as follows:\n “Delete: - Blot out, cancel, censor, cross off, cross \nout, cut, cut out, dele, discard, do away with, drop, \nedit out, efface, elide, eliminate, eradicate, erase, \nexcise, expel, expunge, extirpate, get rid of, leave \nout, modify by excisions, obliterate, omit, remove, \nrub out, rule out, scratch out, strike off, take out, \nweed wipe out.”\nLikewise the expression “omit” is also defined by this Thesaurus \nas follows:-\n“Omit:- Abstain from inserting, bypass, cast aside, \ncount out, cut out, delete, discard, dodge, drop \nexclude, exclude, fail to do, fail to include, fail to \ninsert, fail to mention, leave out, leave undone, let \ngo, let pass, let slip, miss, neglect, omittere, pass \nover, praetermittere, skip, slight, transire.”\nAnd the expression “repeal” is defined as follows:-\n“Repeal:- Abolish, abrogare, abrogate, annul, avoid, \ncancel, countermand, declare null and void, delete, \neliminate, formally withdraw, invalidate, make void, \nnegate, nullify, obliterate, officially withdraw, \noverride, overrule, quash, recall, render invalid, \nrescind, rescindere, retract, reverse, revoke, set \naside, vacate, void, withdraw.”\n12\n\nPage 13\nJUDGMENT\n14.\nOn a conjoint reading of the three expressions “delete”, \n“omit”, and “repeal”, it becomes clear that “delete” and “omit” \nare used interchangeably, so that when the expression “repeal” \nrefers to “delete” it would necessarily take within its ken an \nomission as well. This being the case, we do not find any \nsubstance in the argument that a “repeal” amounts to an \nobliteration from the very beginning, whereas an “omission” is \nonly in futuro. If the expression “delete” would amount to a \n“repeal”, which the appellant’s counsel does not deny, it is clear \nthat a conjoint reading of Halsbury’s Laws of England and the \nLegal Thesaurus cited hereinabove both lead to the same \nresult, namely that an “omission” being tantamount to a \n“deletion” is a form of repeal. \n15.\nLearned counsel’s second argument that Section 6A \nwhen it speaks of an “omission” only speaks of an \n“amendment” which omits and, therefore does not refer to a \nrepeal is equally fallacious. In Bhagat Ram Sharma v. Union \nof India, 1988 Supp SCC 30, this Court held that there is no \nreal distinction between a repeal and an amendment and that \n“amendment” is in fact a wider term which includes deletion of \n13\n\nPage 14\nJUDGMENT\na provision in an existing statute. In the said judgment, this \nCourt held:- \n“17. It is a matter of legislative practice to provide \nwhile enacting an amending law, that an existing \nprovision shall be deleted and a new provision \nsubstituted. Such deletion has the effect of repeal of \nthe existing provision. Such a law may also provide \nfor the introduction of a new provision. There is no \nreal distinction between 'repeal' and an \n'amendment'. \nIn\n \nSutherland's\n \nStatutory \nConstruction, 3rd Edn., Vol. 1 at p. 477, the learned \nauthor makes the following statement of law:\nThe distinction between repeal and amendment as \nthese terms are used by the Courts is arbitrary. \nNaturally the use of these terms by the Court is \nbased largely on how the Legislature have \ndeveloped and applied these terms in labelling their \nenactments. When a section is being added to an \nAct or a provision added to a section, the \nLegislatures commonly entitled the Act as an \namendment.... When a provision is withdrawn from \na section, the Legislatures call the Act an \namendment particularly when a provision is added \nto replace the one withdrawn. However, when an \nentire Act or section is abrogated and no new \nsection is added to replace it, Legislatures label the \nAct accomplishing this result a repeal. Thus as used \nby the Legislatures, amendment and repeal may \ndiffer in kind - addition as opposed to withdrawal or \nonly in degree -abrogation of part of a section as \nopposed to abrogation of a whole section or Act; or \nmore commonly, in both kind and degree - addition \nof a provision to a section to replace a provision \nbeing abrogated as opposed by abrogation of a \nwhole section of an Act. This arbitrary distinction \nhas been followed by the Courts, and they have \ndeveloped separate rules of construction for each. \n14\n\nPage 15\nJUDGMENT\nHowever, they have recognised that frequently an \nAct purporting to be an amendment has the same \nqualitative effect as a repeal - the abrogation of an \nexisting statutory provision -and have therefore \napplied the term \"implied repeal' and the rules of \nconstruction applicable to repeals to such \namendments.\n18. Amendment is in fact, a wider term and it \nincludes abrogation or deletion of a provision in an \nexisting statute. If the amendment of an existing law \nis small, the Act professes to amend; if it is \nextensive, it repeals a law and re-enacts it. An \namendment of substantive law is not retrospective \nunless expressly laid down or by necessary' \nimplication inferred.” (at para 17 & 18)\n16.\nIt is clear, therefore, that when this Court referred to \nSection 6A in Fibre Board’s case and held that Section 6A \nshows that a repeal can be by way of an express omission, \nobviously what was meant was that an amendment which \nrepealed a provision could do so by way of an express \nomission. This being the case, it is clear that Section 6A \nundisputedly leads to the conclusion that a repeal would include \na repeal by way of an express omission. \n17.\nLearned counsel then argued that while distinguishing the \nMadhya Pradesh High Court’s judgment in Rayala Corporation, \na Constitution Bench of this Court expressly held as the first \n15\n\nPage 16\nJUDGMENT\nreason that Section 6 applies only to repeals and not to \nomissions. The Fibre Board’s judgment has clearly held as \nfollows:\n“First and foremost, it will be noticed that two \nreasons were given in Rayala Corporation (P) Ltd. \nfor distinguishing the Madhya Pradesh High Court \njudgment. Ordinarily, both reasons would form the \nratio decidendi for the said decision and both \nreasons would be binding upon us. But we find that \nonce it is held that Section 6 of the General Clauses \nAct would itself not apply to a rule which is \nsubordinate legislation as it applies only to a Central \nAct or Regulation, it would be wholly unnecessary to \nstate that on a construction of the word “repeal” in \nSection 6 of the General Clauses Act, “omissions” \nmade by the legislature would not be included. \nAssume, on the other hand, that the Constitution \nBench had given two reasons for the non-\napplicability of Section 6 of the General Clauses \nAct. In such a situation, obviously both reasons \nwould be ratio decidendi and would be binding upon \na subsequent bench. However, once it is found that \nSection 6 itself would not apply, it would be wholly \nsuperfluous to further state that on an interpretation \nof the word “repeal”, an “omission” would not be \nincluded. We are, therefore, of the view that the \nsecond so-called ratio of the Constitution Bench in \nRayala Corporation (P) Ltd. cannot be said to be a \nratio decidendi at all and is really in the nature of \nobiter dicta.” (at para 27)\n18.\nMerely because the Constitution Bench referred to a \nrepeal not amounting to an omission as the first reason given \n16\n\nPage 17\nJUDGMENT\nfor distinguishing the Madhya Pradesh High Court’s judgment \nwould not undo the effect of paragraph 27 of Fibre Board’s \ncase which, as has already been stated, clearly makes the \ndistinction between Section 6 not applying at all and Section 6 \nbeing construed in a particular manner. Obviously, if the \nSection were not to apply at all, any construction of the Section \nwould necessarily be in the nature of obiter dicta. \n19.\nWe also find that Section 6 could not possibly apply to the \nfacts in Rayala Corporation’s case for yet another reason. \nClause 2 of the amendment rules which was referred to in \nparagraph 14 of the judgment in Rayala Corporation reads as \nfollows:-\n“In the Defence of India Rules, 1962, rule 132A \n(relating to prohibition of dealings in foreign \nexchange) shall be omitted except as respects \nthings done or omitted to be done under that rule.”\n20.\nA cursory reading of clause 2 shows that after omitting \nRule 132A of the Defence of India Rules, 1962, the provision \ncontains its own saving clause. This being the case, Section 6 \ncan in any case have no application as Section 6 only applies \n17\n\nPage 18\nJUDGMENT\nto a Central Act or regulation “unless a different intention \nappears”. A different intention clearly appears on a reading of \nclause 2 as only a very limited savings clause is incorporated \ntherein. In fact, this aspect is noticed by the Constitution Bench \nin paragraph 18 of its judgment, in which the Constitution \nBench states:-\n“As we have indicated earlier, the notification of the \nMinistry of Home Affairs omitting Rule 132-A of the \nD.I.Rs. did not make any such provision similar to \nthat contained in Section 6 of the General Clauses \nAct.” \n21.\nIt was then urged before us that Section 31 of the \nPrevention of Corruption Act, 1988 would also lead to the \nconclusion that Parliament itself is cognizant of the fact that an \nomission cannot amount to a repeal. Section 31 of the \nPrevention of Corruption Act, 1988, states as follows:-\n“Section 31 - Omission of certain sections of Act 45 \nof 1860\nSections 161 to 165A (both inclusive) of the Indian \nPenal Code, 1860 (45 of 1860) shall be omitted, \nand section 6 of the General Clauses Act, 1897 (10 \nof 1897), shall apply to such omission as if the said \nsections had been repealed by a Central Act.”\n18\n\nPage 19\nJUDGMENT\n22.\nIt is settled law that Parliament is presumed to know the \nlaw when it enacts a particular piece of legislation. The \nPrevention of Corruption Act was passed in the year 1988, that \nis long after 1969 when the Constitution Bench decision in \nRayala Corporation had been delivered. It is, therefore, \npresumed that Parliament enacted Section 31 knowing that the \ndecision in Rayala Corporation had stated that an omission \nwould not amount to a repeal and it is for this reason that \nSection 31 was enacted. This again does not take us further as \nthis statement of the law in Rayala Corporation is no longer the \nlaw declared by the Supreme Court after the decision in the \nFibre Board’s case. This reason therefore again cannot avail \nthe appellant. \n23.\nThe reference to the savings provision in Section 1 of the \nIndian Contract Act again does not take us very much further as \nthe expression “repeal” as has been pointed out above can be \nof part of an enactment also. This being the case, when the \nlegislature uses the word “omit” it usually does so when it \nwishes to delete a particular section as opposed to deleting an \nentire Act. As has been noticed both in Fibre Board’s case and \n19\n\nPage 20\nJUDGMENT\nhereinabove, these are all expressions which only go to form \nand not to substance. Even assuming for the sake of argument \nthat we were inclined to agree with Shri Aggarwal, given the \nforce of his inexorable logic, this Court has laid down the \nparameters of when it would be expedient to have a relook at a \nparticular decision in the case of Keshav Mills Co. Ltd. v. CIT, \nBombay North, 1965 (2) SCR 908, as follows.-\n“In dealing with the question as to whether the \nearlier decisions of this Court in the New Jehangir \nMills [1959]37ITR11(SC) case and the Petlad Co. \nLtd. \n[1963] S.C.R. 871 case should be \nreconsidered and revised by us, we ought to be \nclear as to the approach which should be adopted in \nsuch cases. Mr. Palkhivala has not disputed the fact \nthat, in proper case, this Court has inherent \njurisdiction to reconsider and revise its earlier \ndecisions, and so, the abstract question as to \nwhether such a power vests in this Court or not \nneed not detain us. In exercising this inherent \npower, however, this would naturally like to impose \ncertain reasonable limitations and would be \nreluctant to entertain pleas for the reconsideration \nand revision of its earlier decisions, unless it is \nsatisfied that there are compelling and substantial \nreasons to do so. It general judicial experience that \nin matters of law involving question of constructing \nstatutory or constitutional provisions, two views are \noften reasonably possible and when judicial \napproach has to make a choice between the two \nreasonably possible views, the process of decision-\nmaking is often very difficult and delicate. When this \nCourt hears appeals against decisions of the High \n20\n\nPage 21\nJUDGMENT\nCourts and is required to consider the propriety or \ncorrectness of the view taken by the High Courts on \nany point of law, it would be open to this Court to \nhold that though the view taken by the High Court is \nreasonably possible, the alternative view which is \nalso reasonably possible is better and should be \npreferred. In such a case, the choice is between the \nview taken by the High Court whose judgment is \nunder appeal, and the alternative view which \nappears to this Court to be more reasonable; and in \naccepting it own view in preference to that of the \nHigh Court, this Court would be discharging its duty \nas Court of Appeal. But different considerations \nmust inevitably arise where a previous decision of \nthis Court has taken a particular view as to the \nconstruction of a statutory provision as, for instance, \nsection 66(4) of the Act. When it is urged that the \nview already taken by this Court should be reviewed \nand revised, it may not necessarily be an adequate \nreason for such review and revision to hold that \nthough the earlier view is a reasonably possible \nview, the alternative view which is pressed on the \nsubsequent occasion is more reasonable. In \nreviewing and revising its earlier decision, this Court \nshould ask itself whether in interests of the public \ngood or for any other valid and compulsive reasons, \nit is necessary that the earlier decision should be \nrevised. When this Court decides questions of law, \nits decisions are, under Article 141, binding on all \ncourts within the territory of India, and so, it must be \nthe constant endeavour and concern of this Court to \nintroduce and maintain an element of certainty and \ncontinuity in the interpretation of law in the country. \nFrequent exercise by this Court of its power to \nreview its earlier decisions on the ground that the \nview pressed before it later appears to the Court to \nbe more reasonable, may incidentally tend to make \nlaw uncertain and introduce confusion which must \nbe consistently avoided. That is not to say that if on \na subsequent occasion, the Court is satisfied that its \n21\n\nPage 22\nJUDGMENT\nearlier decision was clearly erroneous, it should \nhesitate to correct the error; but before a previous \ndecision is pronounced to be plainly erroneous, the \nCourt must satisfied with a fair amount of unanimity \namongst its members that a revision of the said \nview is fully justified. It is not possible or desirable, \nand in any case it would be inexpedient to lay down \nany principles which should govern the approach of \nthe Court in dealing with the question of reviewing \nand revising its earlier decisions. It would always \ndepend upon several relevant considerations:- What \nis the nature of the infirmity or error on which a plea \nfor review and revision of the earlier view is based? \nOn the earlier occasion, did some patent aspects of \nthe question remain unnoticed, or was the attention \nof the Court not drawn to any relevant and material \nstatutory provision, or was any previous decision of \nthis Court bearing on the point not noticed? Is the \nCourt hearing such plea fairly unanimous that there \nis such an error in the earlier view? What would be \nthe impact of the error on the general administration \nof law or on public good ? Has the earlier decision \nbeen followed on subsequent occasions either by \nthis Court or by the High Courts ? And, would the \nreversal of the earlier decision lead to public \ninconvenience, hardship or mischief ? These and \nother relevant considerations must be carefully \nborne in mind whenever this Court is called upon to \nexercise its jurisdiction to review and review and \nrevise its earlier decisions.” (at page 921-922)\n24.\nFibre Board’s case is a recent judgment which, as has \ncorrectly been argued by Shri Radhakrishnan, learned senior \ncounsel on behalf of the revenue, clarifies the law in holding \nthat an omission would amount to a repeal. The converse view \n22\n\nPage 23\nJUDGMENT\nof the law has led to an omitted provision being treated as if it \nnever existed, as Section 6 of the General Clauses Act would \nnot then apply to allow the previous operation of the provision \nso omitted or anything duly done or suffered thereunder. Nor \nmay a legal proceeding in respect of any right or liability be \ninstituted, continued or enforced in respect of rights and \nliabilities acquired or incurred under the enactment so omitted. \nIn the vast majority of cases, this would cause great public \nmischief, and the decision of Fibre Board’s case is therefore \nclearly delivered by this Court for the public good, being, at the \nvery least a reasonably possible view. Also, no aspect of the \nquestion at hand has remained unnoticed. For this reason also \nwe decline to accept Shri Aggarwal’s persuasive plea to \nreconsider the judgment in Fibre Board’s case. This being \nthe case, it is clear that on point one the present appeal would \nhave to be dismissed as being concluded by the decision in the \nFibre Board’s case. \n25.\nEven on the point of limitation, we find that the High Court \nnoticed that the assessee undertook to pay the amount with \ninterest upto 31.3.2003, on which date a last part payment was \n23\n\nPage 24\nJUDGMENT\nmade. As the demand was raised by the Department on \n19.8.2005 i.e. within a period of three years from 31.3.2003, it is \nclear that the said recovery notice would not be beyond the \ntime limit. \n26.\nHowever, Shri Aggarwal has also argued that in this \nappeal as well as in Civil Appeal No.4281 and 4282 of 2007, \nthe Rule providing for payment of interest would itself be ultra \nvires inasmuch as Section 3A of the Act does not itself provide \nfor the payment of interest. He argued that despite the fact that \nthis point was not raised before any of the authorities below he \nought to be allowed to raise it for the first time in this Court not \nonly as it is a pure question of law but also because, according \nto him, this Court has held that rules which are ultra vires ought \nto be ignored by the courts even if there is no substantive \nchallenge to them. \n27.\nShri Radhakrishnan, learned senior advocate appearing \nfor the revenue, strongly contradicts this position and has \nvehemently argued that since this issue was never raised \nbefore the authorities below, this Court should not allow the \nappellant to raise it at this belated stage. He further submitted \n24\n\nPage 25\nJUDGMENT\nthat in any case it would not be necessary for the statute to \nprovide for interest and it is good enough that subordinate \nlegislation in the nature of a rule could do so. Inasmuch as \nthese cases relate to interest and penalty leviable under certain \nprovisions of the Central Excise Rules, it may be necessary to \nset out the said provisions. They read as follows:\n “RULE 96ZO. Procedure to be followed by the \nmanufacturer of ingots and billets.\n (3)……..\nProvided also that where a manufacturer fails to pay \nthe whole of the amount payable for any month by \nthe 15th day or the last day of such month, as the \ncase may be, he shall be liable to,-\n(i)\nPay the outstanding amount of duty along with \ninterest thereon at the rate of eighteen per cent. per \nannum, calculated for the period from the 16th day of \nsuch month or the 1st day of next month, as the \ncase may be, till the date of actual payment of the \noutstanding amount; and\n(ii)\nA penalty equal to such outstanding amount of \nduty or five thousand rupees, whichever is greater.”\nRULE 96ZP. Procedure to be followed by the \nmanufacturer of hot rolled products. \n (3)…….\nProvided also that where a manufacturer fails to pay \nthe whole of amount of duty payable for any month \n25\n\nPage 26\nJUDGMENT\nby the 10th day of such month, he shall be liable to \npay, -\n(i)\nThe outstanding amount of duty along with \ninterest thereon at the rate of eighteen per cent. per \nannum calculated for the period from the 11th day of \nsuch month till the date of actual payment of the \noutstanding amount; and\n(ii)\nA penalty equal to the amount of duty \noutstanding from him at the end of such month or \nfive thousand rupees, whichever is greater.\nRule 96ZQ Procedure to be followed by the \nindependent processor of textile fabrics.\n (5) If an independent processor fails to pay the \namount of duty or any part thereof by the date \nspecified in sub-rule (3), he shall be liable to,-\n(i)\nPay the outstanding amount of duty along with \ninterest at the rate of thirty-six per cent per annum \ncalculated for the outstanding period on the \noutstanding amount; and \n(ii)\nA penalty equal to an amount of duty \noutstanding from him or rupees five thousand, \nwhichever is greater.”\n28.\nShri Aggarwal in order to buttress his submission that he \nought to be allowed to raise a pure question of law going to the \nvery jurisdiction to levy interest cited before us the judgment in \nBhartidasan University and Another v. All-India Council for \nTechnical Education, 2001 (8) SCC 676, and in particular \nparagraph 14 thereof which reads as follow:-\n26\n\nPage 27\nJUDGMENT\n“The fact that the Regulations may have the force of \nlaw or when made have to be laid down before the \nlegislature concerned do not confer any more \nsanctity or immunity as though they are statutory \nprovisions themselves. Consequently, when the \npower to make Regulations are confined to certain \nlimits and made to flow in a well defined canal within \nstipulated banks, those actually made or shown and \nfound to be not made within its confines but outside \nthem, the Courts are bound to ignore them when \nthe question of their enforcement arise and the \nmere fact that there was no specific relief sought for \nto strike down or declare them ultra vires, \nparticularly when the party in sufferance is a \nRespondent to the lis or proceedings cannot confer \nany further sanctity or authority and validity which it \nis shown and found to obviously and patently lack. It \nwould, therefore, be a myth to state that \nRegulations made under Section 23 of the Act have \n\"Constitutional\" and legal status, even unmindful of \nthe fact that anyone or more of them are found to be \nnot consistent with specific provisions of the Act \nitself. Thus, the Regulations in question, which the \nAICTE could not have made so as to bind \nuniversities/UGC within the confines of the powers \nconferred upon it, cannot be enforced against or \nbind an University in the matter of any necessity to \nseek prior approval to commence a new department \nor course and programme in technical education in \nany university or any of its departments and \nconstituent institutions.”\n29. It would be seen that Shri Aggarwal is on firm ground \nbecause this Court has specifically stated that rules or \nregulations which are in the nature of subordinate legislation \nwhich are ultra vires are bound to be ignored by the courts \n27\n\nPage 28\nJUDGMENT\nwhen the question of their enforcement arises and the mere \nfact that there is no specific relief sought for to strike down or \ndeclare them ultra vires would not stand in the court’s way of \nnot enforcing them. We also feel that since this is a question of \nthe very jurisdiction to levy interest and is otherwise covered by \na Constitution Bench decision of this Court, it would be a \ntravesty of justice if we would not to allow Shri Aggarwal to \nmake this submission. \n30.\nOn merits, the matter is no longer res integra. A \nConstitution Bench decision of this Court in VVS Sugars v. \nGovernment of A.P., 1999 (4) SCC 192, has held, following \ntwo earlier judgments of this Court, as follows:-\n“This Court in India Carbon Ltd. v. State of \nAssam [(1997) 6 SCC 479] has held, after analysing \nthe Constitution Bench judgment in J.K. Synthetics \nLtd. v. CTO [(1994) 4 SCC 276] that interest can be \nlevied and charged on delayed payment of tax only \nif the statute that levies and charges the tax makes \na substantive provision in this behalf. There being \nno substantive provision in the Act for the levy of \ninterest on arrears of tax that applied to purchases \nof sugarcane made subsequent to the date of \ncommencement of the amending Act, no interest \nthereon could be so levied, based on the application \nof the said Rule 45 or otherwise.”\n28\n\nPage 29\nJUDGMENT\n31.\nApplying the Constitution Bench decision stated above, it \nwill have to be declared that since Section 3A which provides \nfor a separate scheme for availing facilities under a compound \nlevy scheme does not itself provide for the levying of interest, \nRules 96 ZO, 96 ZP and 96 ZQ cannot do so and therefore on \nthis ground the appellant in Shree Bhagwati Steel Rolling Mills \nhas to succeed. On this ground alone therefore the impugned \njudgment is set aside. That none of the other provisions of the \nCentral Excise Act can come to the aid of the Revenue in cases \nlike these has been laid down by this Court in Hans Steel \nRolling Mill v. CCE, (2011) 3 SCC 748 as follows: \n“13. On going through the records it is clearly \nestablished that the appellants are availing the \nfacilities under the compound levy scheme, which \nthey themselves opted for and filed declarations \nfurnishing details about the annual capacity of \nproduction and duty payable on such capacity of \nproduction. It has to be taken into consideration that \nthe compounded levy scheme for collection of duty \nbased on annual capacity of production under \nSection 3 of the Act and the 1997 Rules is a \nseparate scheme from the normal scheme for \ncollection of Central excise duty on goods \nmanufactured in the country. Under the same, Rule \n96-ZP of the Central Excise Rules stipulate the \nmethod of payment and Rule 96-ZP contains \ndetailed provision regarding time and manner of \npayment and it also contains provisions relating to \n29\n\nPage 30\nJUDGMENT\npayment of interest and penalty in event of delay in \npayment or non-payment of dues. Thus, this is a \ncomprehensive scheme in itself and general \nprovisions in the Act and the Rules are excluded.” \n(at page 751)\n32.\nWe now come to the other appeals which concern \nthemselves with penalties that are leviable under Rules 96 ZO, \n96 ZP and 96 ZQ. Since the lead judgment is a detailed \njudgment by a Division Bench of the Gujarat High Court \nreported in Krishna Processors v. Union of India, 2012 (280) \nELT 186 (Guj.) and followed by other High Courts, we will refer \nonly to this decision.\n33.\nOn the facts before the Gujarat High Court, there were \nthree civil applications each of which challenged the \nconstitutional validity of the aforesaid rules insofar as they \nprescribed the imposition of a penalty equal to the amount of \nduty outstanding without any discretion to reduce the same \ndepending upon the time taken to deposit the duty. The \nGujarat High Court struck down the aforesaid Rules on the \nbasis that not only were they ultra vires the Act but they were \narbitrary and unreasonable and therefore violative of Articles 14 \nand 19(1)(g) of the Constitution.\n30\n\nPage 31\nJUDGMENT\n34.\nShri Radhakrishnan, learned senior advocate appearing \non behalf of the revenue found it extremely difficult to argue that \nthe aforesaid judgment was wrong. He therefore asked us to \nlimit the effect of the judgment when it further held that after \nomission of the aforesaid Rules with effect from 1.3.2001 no \nproceedings could have been initiated thereunder. In this \nsubmission he is correct for the simple reason that the Gujarat \nHigh Court followed Rayala Corporation in holding that \n“omissions” would not amount to “repeals”, which this Court \nhas now clarified is not the correct legal position. \n35.\nHowever, insofar the reasoning of the High Court is \nconcerned on the aspects stated hereinabove, we find that on \nall three counts it is unexceptionable. First and foremost, a \ndelay of even one day would straightaway, without more, attract \na penalty of an equivalent amount of duty, which may be in \ncrores of rupees. It is clear that as has been held by this Court, \npenalty imposable under the aforesaid three Rules is inflexible \nand mandatory in nature. The High Court is, therefore, correct \nin saying that an assessee who pays the delayed amount of \nduty after 100 days is to be on the same footing as an \n31\n\nPage 32\nJUDGMENT\nassessee who pays the duty only after one day’s delay and that \ntherefore such rule treats unequals as equals and would, \ntherefore, violate Article 14 of the Constitution of India. It is also \ncorrect in saying that there may be circumstances of force \nmajeure which may prevent a bonafide assessee from paying \nthe duty in time, and on certain given factual circumstances, \ndespite there being no fault on the part of the assessee in \nmaking the deposit of duty in time, a mandatory penalty of an \nequivalent amount of duty would be compulsorily leviable and \nrecoverable from such assessee. This would be extremely \narbitrary and violative of Article 14 for this reason as well. \nFurther, we agree with the High Court in stating that this would \nalso be violative of the appellant’s fundamental rights under \nArticle 19(1)(g) and would not be saved by Article 19(6), being \nan unreasonable restriction on the right to carry on trade or \nbusiness. Clearly the levy of penalty in these cases of a \nmandatory nature for even one day’s delay, which may be \nbeyond the control of the assessee, would be arbitrary and \nexcessive. In such circumstances, this Court has held in Md. \nFaruk v. State of M.P., 1970(1) SCR 156: \n32\n\nPage 33\nJUDGMENT\n“The Court must in considering the validity of the \nimpugned law imposing a prohibition on the carrying \non of a business or profession, attempt an \nevaluation of its direct and immediate impact upon \nthe fundamental rights of the citizens affected \nthereby and the larger public interest sought to be \nensured in the light of the object sought to be \nachieved, the necessity to restrict the citizen's \nfreedom, the inherent pernicious nature of the act \nprohibited or its capacity or tendency to be harmful \nto the general public, the possibility of achieving the \nobject by imposing a less drastic restraint, and in \nthe absence of exceptional situations such as the \nprevalence of a state of emergency-national or \nlocal-or the necessity to maintain essential supplies, \nor the necessity to stop activities inherently \ndangerous, the existence of a machinery to satisfy \nthe administrative authority that no case for \nimposing the restriction is made out or that a less \ndrastic restriction may ensure the object intended to \nbe achieved.” (at page 161)\n36.\nThe direct and immediate impact upon the fundamental \nright of the citizen is that he is exposed to a huge liability by \nway of penalty for reasons which may in given circumstances \nbe beyond his control and/or for delay which may be minimal. \nThe possibility of achieving the object of deterrence in such \ncases can be achieved by imposing a less drastic restraint. In \npoint of fact when we contrast these provisions with Section 37 \nof the Act, it becomes clear how arbitrary and excessive they \nare. \n33\n\nPage 34\nJUDGMENT\n37.\nSection 37(3) and 37(4) of the Central Excise Act reads \nas follows:-\n“Section 37. Power of Central Government to make \nrules. —\n(3) In making rules under this section, the Central \nGovernment may provide that any person \ncommitting a breach of any rule shall, where no \nother penalty is provided by this Act, be liable to a \npenalty not exceeding five thousand rupees. \n(4) Notwithstanding anything contained in sub-\nsection (3), and without prejudice to the provisions \nof section 9, in making rules under this section, the \nCentral Government may provide that if any \nanufacturer, producer or licensee of a warehouse \n— \n(a) removes any excisable goods in contravention of \nthe provisions of any such rule, or \n(b) does not account for all such goods \nmanufactured, produced or stored by him, or\n(c) engages in the manufacture, production or \nstorage of such goods without having applied for the \nregistration required under section 6, or\n(d) contravenes the provisions of any such rule with \nintent to evade payment of duty, \nthen, all such goods shall be liable to confiscation \nand the manufacturer, producer or licensee shall be \nliable to a penalty not exceeding the duty leviable \non such goods or ten thousand rupees, whichever is \ngreater;”\n38.\nUnder Section 37(3), the statute itself provides in all \ncases where no other penalty is provided by the Act that a \n34\n\nPage 35\nJUDGMENT\npenalty not exceeding Rs.5,000/- alone can be levied. Sub-\nSection(4) is even more telling. Even in cases where there is a \nclandestine removal of excisable goods, and cases where the \nassessee intends to evade payment of duty, the assessee is \nliable to a penalty not exceeding the duty leviable on such \ngoods or Rs.10,000/- whichever is greater. It will be noticed \nthat the Act is very circumspect in laying down penalty \nprovisions. Penalties in given circumstances extend only to \nRs.5,000/- and Rs.10,000/- which are small amounts. Further, \neven where clandestine removal and intent to evade duty are \npresent, yet the authorities are given a discretion to levy a \npenalty higher than Rs.10,000/- but not exceeding the duty \nleviable. In a given case, therefore, even where there is willful \nintent to evade duty and the duty amount comes to say a crore \nof rupees, the authorities can in the facts and circumstances of \na given case, levy a penalty of say Rs.25,00,000/- or \nRs.50,00,000/-. This being the position, it is clear that when \ncontrasted with the provisions of the Central Excise Act itself, \nthe penalty provisions contained in Rules 96ZO, 96 ZP and 96 \nZQ are both arbitrary and excessive. \n35\n\nPage 36\nJUDGMENT\n39.\nA penalty can only be levied by authority of statutory law, \nand Section 37 of the Act, as has been extracted above does \nnot expressly authorize the Government to levy penalty higher \nthan Rs.5,000/-. This further shows that imposition of a \nmandatory penalty equal to the amount of duty not being by \nstatute would itself make rules 96ZO, 96 ZP and 96 ZQ without \nauthority of law. We, therefore, uphold the contention of the \nassessees in all these cases and strike down rules 96ZO, 96 \nZP and 96 ZQ insofar as they impose a mandatory penalty \nequivalent to the amount of duty on the ground that these \nprovisions are violative of Article 14, 19(1)(g) and are ultra vires \nthe Central Excise Act. \n40.\nIt now remains to deal with SLP(civil) No.22134 of 2000, \n(APS Associates v. Commissioner of Central Excise). In this \nSLP, the Punjab and Haryana High Court has passed a \njudgment on 20.5.2008 in which it construed Rule 3(2) of the \nInduction Furnace Annual Capacity Determination Rules, 1997. \nThe said Rule is set out hereinbelow:-\n“3.\nThe annual capacity of production referred \nto in Rule 2 shall be determined in the following \nmanner, namely :-\n36\n\nPage 37\nJUDGMENT\nThe Commissioner of Central Excise (hereinafter \nreferred to as the Commissioner) shall call for an \nauthenticated copy of the manufacturer’s invoice or \ntrader’s invoice, who have supplied or installed the \nfurnace or crucible to the induction furnace unit, and \nascertain the total capacity of the furnaces \ninstalled in the factory on the basis of such invoice \nor document;\n(1)\nIf the invoice or document referred to in \nsub rule (1) is not available for any reason with \nthe manufacturer then the Commissioner shall \nascertain the capacity of the furnaces installed in \nthe induction furnace unit on the basis of the \ncapacity of comparable furnaces installed in any \nother factory \nin respect of which the \nmanufacturer’s invoice or other document indicating \nthe capacity of the furnace is available or, if not so \npossible, on the basis of any other material as \nmay be relevant for this purpose. The \nCommissioner may, if he so desires, consult \nany technical authority for this purpose;”\n41.\nOn the facts in this case, the assessee made a \ndeclaration dated 9.9.1997 that they will pay lump sum duty on \nthe basis that their induction furnace has a capacity of only 3.2 \nmetric tons. As they were unable to trace out the original bill, \nthey worked out their capacity on the basis of a Chartered \nEngineer’s Certificate dated 7.9.1997 which stated as follows:-\n“REF. : Js CE/97\nDATED 07.09.97\n197\n37\n\nPage 38\nJUDGMENT\nTO WHOM IT MAY CONCERN\nOn the request of M/s. A.P.S. ASSOCIATES PVT \nLIMITED, I visited their works at D-133, Phase V. Focal \nPoint. Ludhiana for inspection of the INDUCTION \nFURNACE and assessing the capacity thereof.\nThe party has ONE FURNACE of following \nspecifications:- \nMAKE \nGEC CAPACITY\n 3200 \nKG/1600 KW/1200 V.\nWhile assessing the capacity of a FURNACE for a \nparticular heat. It may please be noted that besides \ncrucible size, other factors affecting the capacity are as \nfollows:\nIncoming Power to the crucible from the Power Pack \nSystem of the FURNACE and its quality.\nPower fed to the crucible from the Power Pack System of \nthe FURNACE and its quality.\nQuality/Mix of Scrap.\nLining quality and its thickness.\nThe heatwise capacity may vary for a crucible out over a \ngiven period of time, the average output/Capacity shall \nremain almost same.\nHowever, in this case, it may please be noted that at \npresent, this unit has a sanctioned load of 1680 KVA \n(Photocopy enclosed) resulting in a load of 1428 KW, that \ncan be utilized by the unit. After allowing for an Aux. load \nof approximately 125 KW, the load available for melting \nshall be approximately 1300 KW. As such, the unit shall \nnot be able to utilize the full capacity of the furnace i.e. \n1600 KW.”\n38\n\nPage 39\nJUDGMENT\n42. \nThe said declaration and Chartered Engineer Certificate \nhave not been accepted by the authorities below, and the High \nCourt rejected it on the footing that Rule 3(2) of the aforesaid \nRules did not, in terms, refer to the sanctioned load of electrical \nunits, and therefore this could not be taken into account for the \npurpose of ascertaining the capacity of the furnaces installed in \nthe induction furnace unit. We find that the Karnataka High \nCourt Bhuwalka Steel Industries Ltd. v. Union Of India \n2003(159) ELT 147 (Kar.), after quoting the aforesaid Rule, \nheld as follows:-\n“11. Section 3-A of the Central Excise Act provides \nfor a power to change the excise duty on the basis \nof capacity of production in respect of the notified \ngoods. This has been introduced with a view to \nsafeguard the interest of Revenue and to arrest \nevasion of duty. Sub-section (2) of Section 3-A \nprovides for framing of Rules in the matter of \ndetermination of the annual capacity. It specifically \nprovides for taking into consideration such factor or \nfactors relevant for annual capacity of production of \nthe factory in which goods are produced. Therefore, \nrelevant factor like power factor is not alien for \ndetermination of annual production capacity in \nterms of Section 3-A of the Act. At this stage it is to \nbe noticed that the formula provided in Rule 3 of the \nInduction Furnace Annual Capacity Determination \nRules provides for three contingencies. The first \ncontingency is the determination on the basis of \nauthenticated copy of the manufacturers invoice or \n39\n\nPage 40\nJUDGMENT\ntraders invoice who have supplied or installed the \nfurnace. The second contingency is that in the \nabsence of the invoice document being available for \nany reason with the manufacturer that the \nCommissioner is to ascertain the capacity on the \nbasis of the capacity of the comparable furnaces \navailable in similar industry. The third contingency is \ndetermination of the annual capacity of production \nof ingots by formula. The formula is ACP = TCF × \n3200. ACP is nothing but the annual capacity of \nproduction of the factory. TCF is also again referred \nto the total capacity. Therefore, capacity plays a \nvital role in terms of levy of excess duty.\n12. In the case on hand, the petitioner has sought \nfor an option that the annual capacity is to be \ndetermined on pro rata basis in terms of Rule 96-\nZO(3) of the Rules. Petitioner has produced \nsufficient material with regard to power factor being \na relevant one. As I mentioned earlier, it is not the \ncase of the respondents that power factor is not a \nrelevant factor in terms of the endorsement. \nHelplessness is the answer given in the \nendorsement. There is no prohibition under the \nrules for taking into consideration the power factor \nfor determination of the annual capacity. So long as \nthe power factor is not said to be irrelevant factor, \nthat factor has to go into the process of \ndetermination in terms of Section 3-A read with the \nRules.”\n43.\nWe are in broad agreement with the Karnataka High \nCourt view as it is clear that the load capacity of an induction \nfurnace unit is certainly relevant material referred to in Rule 3(2) \n40\n\nPage 41\nJUDGMENT\nto determine the capacity of the furnace installed. It is obvious \nthat it is not necessary to state such load capacity in terms for it \nto be included in Rule 3(2). Agreeing therefore with the \nKarnataka High Court’s view we set aside the judgment of the \nPunjab and Haryana High Court and declare that a Chartered \nEngineer Certificate dealing with the sanctioned electrical load \nfor a furnace is a relevant consideration which can be looked at \nin the absence of other factors mentioned in Rule 3. This \nappeal is disposed of accordingly. \n44.\nConclusion\nWe have declared in this judgment that the interest and \npenalty provisions under the Rules 96ZO, ZP, and ZQ of the \nCentral Excise Rules, 1994 are invalid for the reasons assigned \nin the judgment. Accordingly, the appeals filed by the Revenue \nare dismissed and the appeals filed by the assessees are \nallowed to the extent indicated above. It may be noted that in \nan appeal from a judgment of the Allahabad High Court dated \n8.11.2012 in SLP (C) No. 9796/2013, it has been held that the \n41\n\nPage 42\nJUDGMENT\nlevy of penalty under the aforesaid provisions is mandatory in \ncharacter. In view of what has been held by us today, this \nappeal will also have to be allowed in the same terms as the \nother assessees’ appeals which have been allowed. All the \naforesaid appeals are disposed of accordingly.\n……………………J.\n(A.K. Sikri)\n……………………J.\nNew Delhi;\n(R.F. Nariman)\nNovember 24, 2015. \n42\n"