SALEEM AKHTAR,J.--1. The petitioners acquired a running business of hotel and bar on 30th March, 1975 from its previous owners and re-named it as Plaza Hotel and Bar. The petitioners ceased to carry on the said business from 30th June, 1976. Respondent No. 1 by a show-cause notice dated 29th September, 1976 enumerated the alleged contraventions by the petitioners of the provisions of Rules 9, 96-W, 174,176 and 226 of Central Excise Rules, 1944. The petitioners were required to show cause why Central Excise Duty amounting to Rs. 54,076,40 and Rs. 84,893.75 and additional duty amounting to Rs. 17,082 and 29,962.37 should not be recovered on services rendered and sales of liquor respectively from them under Rules 10 and 96-W of the Central Excise Rules, 1944 in respect of period commencing from August, 1974 to June, 1976. Respondent No. 3 by order dated 13th November, 1976 ordered that Rs. 1,38,972.15 being the duty evaded should be recovered from the owner and manager under rule 96-W and additional duty being half of the said amount be recovered and penalty of Rs. 50,000 was also imposed. The petitioners filed an appeal which was rejected as time-barred. In revision by order dated 6th April, 1977 the Collector was directed to decide appeal on merits. On re-hearing the Collector of Central Excises and Land Customs set aside the order of Deputy Collector of Central Excises and Land Customs respondent No. 3 and the case was remanded for fresh decision after hearing the petitioners. Respondent No. 3 by order dated 26th December, 1978 maintained that the petitioners were liable to pay duty of Rs. 1,38,972.15 with effect from July, 1974 together with additional duty equivalent to half of this amount and imposed a penalty of Rs. 2,00,000. The petitioners filed appeal against this order before the Collector who by order dated 14th February, 1980 waived the Central Excise Duty from July, 1974 to 30th March, 1975 and the petitioners were ordered to pay Rs. 1,06,256.55 as excise duty from 1st April, 1975 to 30th June, 1976 and also pay additional duty amounting to Rs. 53,128,27. The penalty of Rs. 2,00,000 was reduced to Rs. 50,000. The petitioners then filed a revision application before respondent No. 1. By the impugned order Central Excise Duty was reduced by Rs. 10,625 as vacancy factor had not been taken into consideration by the lower authorities. Consequently additional duty was reduced by an amount of Rs. 5,312. The penalty of Rs. 50,000 was also reduced to 25,000.
2. In the counter-affidavit filed on behalf of the respondents it has been stated that the petitioners were providing and rendering services liable to excise duty without obtaining central excise licence and were not maintaining any account as prescribed by rules. They were therefore liable to penalty. It has further been stated that under rule 96-W (6) the additional duty is not a regulatory duty but is in the nature of a penalty. The word penalty has not been used but the said omission would not change the character of the additional duty which is penalty.
3. Mr. Mohammad Ali Sayeed the learned counsel for the petitioners has contended that additional duty is a tax and cannot be imposed by rules. He has further contended that Rule 96-W (6) contemplates levy of additional duty where the duty is not paid by the due date and rule 210 prescribes penalty where no other penalty is provided in respect of offences committed by any person. The contention of the learned counsel can well be appreciated by referring to section 37 of the Central Excises and Salt Act, 1944 hereinafter referred to as the Act and Rules 96-W (6) and 210 of the Central Excise Rules, 1944 which are reproduced as follows:- "Section 37: Power of (Central Board of Revenue) to make rules.
(1) The (Central Board of Revenue) may make rules to carry into effect the purposes of this Act.
(2) * * * * * * * * *
(3) In making rules under this section, the (Central Board of Revenue) may provide that any person committing a breach of any rule shall, without prejudice to any other action that may be taken against him under this Act, be liable to a penalty not exceeding two thousand rupees Or ten times the amount of duty involved, whichever, is greater and that any article in respect of which any such breach is committed shall be confiscated.''
Rule 96-W..........
(1)* * * * * * * * * (2)* * * * * * * * * (3)* * * * * * * * * (4)* * * * * * * * * (5)* * * * * * * * *
(6) Where the duty is not paid by the due date the owner or manager shall pay an additional duty of half of the amount of duty due."
Rule 210. General penalty.-A breach of these Rules shall, where no other penalty is provided herein, be punishable with a penalty which may extend to two thousand rupees or ten times the amount of duty involved, whichever is greater and with confiscation of the goods in respect of which the offence is committed.
4. Section 37 of the Act confers power on Central Board of Revenue to make rules to carry out the purpose of the Act. Sub-section (3) of Section 37 empowers the Central Board of Revenue to frame rule for imposition of fine and confiscation of goods in case where any person defaults in performance of the rules. This penalty will be without prejudice to any other action that may be taken under the Act. Therefore, independent of any action which may be taken under the Act rule can be framed for imposition of fine not exceeding Rs. 2,000 or 10 times of the duty involved whichever is higher and confiscation of the goods involved in case of breach of the Rules. Rule 37
(3) is an enabling provision which authorises the imposition of fine and confiscation of goods independent of any other action which may be taken under the Act against a person guilty of violation of rules. Therefore, it seems that by these provisions additional penalty can also be imposed in respect of default or breach committed by a person for which action can be taken under the Act. This interpretation finds support from the historical background of this provision. The words 'without prejudice to any other action that may be taken against him under this Act' were substituted by the Finance Ordinance, 1968 for the words 'where no other penalty is provided'.
Therefore, before amendment where no other penalty was provided rules could be framed imposing penalty for breach of rules. By section 37 as it exists now the rule- making power for imposing penalty on a person for breach of rules is without prejudice to any other action that may be taken under the Act.
5. Rule 96-W provides a special procedure for hotel and restaurant which prescribes liability of the owner or manager for payment of the duty, mode of conducting business and maintaining the accounts. Sub-rule (6) provides that where duty is not paid on or before the 10th day of each month additional duty can be imposed. Rule 96-W (6) imposes additional duty, it does not impose any penalty as required by section 37 (3). Rule 210 imposes penalty in general where no penalty is provided for breach of rule. Therefore, if the rules do not provide for any penalty for breach of any rule, rule 210 will apply. The respondents have admitted in their counter- affidavit that Rule 96-W sub-rule (6) provides for penalty and not the additional duty. In a statute where a penalty is imposed it should be specified in unambiguous terms and unless it can be spelt out clearly that the penalty has been imposed, merely because the rule-making authority intended to impose penalty and has wrongly used the words 'additional duty' will not convert it into a penalty. It is an elementary principle of justice that where a person is to be penalized for breach of any rule or law the penalty should be known in clear terms. A duty can be imposed only in exercise of legislative power as provided in the Constitution and not by exercising rule-making power by any authority or Central Board of Revenue. We are therefore of the view that rule 96-W (6) is ultra vires the Act.
Section 37 (3) being an enabling provision does not impose any penalty but empowers the Central Board of Revenue to make rule for imposition of additional penalty and not additional duty. We therefore declare that the impugned orders have been passed without lawful authority and are of no legal effect. We remand the case to respondent No. 1 to rehear the revision application and decide it in the light of the observation made in this judgment.