Rangoli Prints vs CGST & Central Excise Surat

Customs, Excise & Service Tax Appellate Tribunal
West Zonal Bench at Ahmedabad

REGIONAL BENCH-COURT NO. 2

EXCISE APPEAL NO. 12184 of 2019-DB

(Arising out of OIO No. SUR-EXCUS-002-COM-014-016-16-17 Dated- 29/04/2016 passed by
the Commissioner, Central Excise, Customs and Service Tax-SURAT-II)
RANGOLI PRINTS ……..Appellant
Shri Farooq Siddik, 23 & 24,
Ship Raj Row House,
Behind Shilp Raj Building,
Adajan Patia, Surat- 395009
VERSUS
COMMISSIONER OF CENTRAL GOODS &

SERVICES TAX & CENTRAL EXCISE -SURAT …….Respondent
NEW CENTRAL EXCISE BUILDING,
OPP. GANDHI BAUG, CHOWK BAZAAR,
SURAT-395001

APPEARANCE:
Shri Manish Barot, Consultant for the Appellant
Shri Mihir G Rayka, Additional Commissioner (AR) for the Respondent

CORAM:
HON'BLE Dr. AJAYA KRISHNA VISHVESHA, MEMBER ( JUDICIAL)
HON'BLE MR. SATENDRA VIKRAM SINGH, MEMBER ( TECHNICAL )

Final Order No. 10799/2026
DATE OF HEARING: 30.04.2026
DATE OF DECISION: 29.10.2026

SATENDRA VIKRAM SINGH
M/s Rangoli Prints, GIDC, Sachin, Surat (Appellant) are engaged in
processing of man-made fabrics falling under chapter heading 5406 of the
Central Excise Tariff Act, 1985. The Compound Levy Scheme under Section 3A
of the Central Excise Act, 1944, for independent processors was introduced
vide Notification No. 42/1998-CE(NT) to 44/1998-CE(NT) dated 10.12.1998
as amended by Notification No. 14/2000- CE(NT) dated 01.03.2000. As per
Notification No. 19/2000-CE dated 01.03.2000, duty on processed textile
fabrics falling under CTH 5406 by an independent processor with the aid of
hot air stenter shall be @ Rs. 3 Lakh per chamber per month where average
value of processed fabric is upto and including Rs. 30 per square meter. For
average value of fabric exceeding Rs. 30 per square meter, duty of Rs. 3.50
lakhs per chamber per month was provided. As per above, appellant having
four hot chambers, was required to pay duty @ Rs. 12 lakhs per month for

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the period from April 2000 to September 2000. Section 3A(4) also provided
an option to manufacturer for seeking redetermination of duty on the basis of
actual production as per Notification No. 19/2000-NT dated 01.03.2000.
1.1 The appellant had filed special civil application No. 4216 of 1999 in
Hon’ble High Court of Gujarat which vide Interim order dated 19.06.1999
provided that the unit was required to pay duty on the basis of actual
production. As per this interim order, appellant had paid duty of Rs. 2,65,076/-
and therefore, Revenue issued a show cause notice dated 21.03.2001 for
recovering the balance amount of duty of Rs. 69,34,924/- along with interest
@ 24 % P.A. under Rule 96 ZQ(5)(i) of Central Excise Rules, 1944 read with
Section 11A(1) of the Central Excise Act, 1944. Proposal was also made to
impose penalty under Rule 96 ZQ(5)(ii) of the said Rules. Two more show
th
cause notices were issued to the appellant, one dated 28 September, 2001
for demanding duty of Rs. 36 lakhs for the period October 2000 to December
th
2000 and the other one dated 30 December 2001 for demanding duty of Rs.
24 lakhs for the months of January & February 2001 along with interest and
penalty.
1.2 The first show cause notice dated 21.03.2001 was decided by the
Commissioner vide OIO No. 2/DEM/2004 dated 21.01.2004 wherein he
confirmed the duty demand of Rs. 69,34,924/- under Section 11A(1) of the
Central Excise Act, 1944 read with Rule 96 ZQ(5)(i) along with interest @ 24%
with equal penalty under Rule 96 ZQ(5)(ii) of the said Rules. The appellant
challenged the order before CESTAT Ahmedabad which vide Final order No.
A/382/WZD/AHD/2008 dated 04.03.2008, remanded the matter to the
Commissioner for fresh decision on the ground that factual position could not
be considered by the Commissioner as the appellant did not file any written
reply and also did not attend the personal hearing. The appellant was directed
to cooperate, file written reply and attend the personal hearing, without
seeking unnecessary adjournments.

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1.3 In remand proceedings, learned Commissioner also clubbed the other
two show cause notices and decided the matter vide common order dated
29.04.2016. The appellant in spite of above direction of the appellant, did not
attend the personal hearings nor personal hearing letters sent to them were
received. The said letters were returned back by the postal authorities with
the remark “ party left ”. After going through various decisions, the learned
Commissioner confirmed duty demand proposed in the above these show
cause notices, under Section 11A(1) of the Central Excise Act, 1944 read with
Rule 96 ZQ(5)(i) of the Central Excise Rules, 1944 with interest @ 24%. He
also imposed penalty of Rs. 2,40,000/- in the case of show cause notice dated
st
30.12.2001, penalty of Rs. 7 lakhs in show cause notice dated 21 March,
th
2001 and penalty of Rs. 3,60,000/- in respect of show cause notice dated 20
September, 2001. Aggrieved with the above order, appellant filed the present
appeals before this Tribunal.
2. In their appeal, the appellant took following grounds and pleaded to set
aside the demand by allowing their appeals: -
th
• They have not received the show cause notice dated 20 September, 2001
and SCN dated 13.12.2001 and therefore, demand is time barred. The
maximum time available with Central Excise Officer to serve show cause
notice is 5 years from the relevant date whereas in the present case, they
have not received two show cause notices even after passing of 19 years.
Therefore, confirmation of duty on the basis of show cause notices not
served upon them, is legally not sustainable.
• As per interim order dated 17.06.1999 of Hon’ble Gujarat High Court in
their Special Civil Application No. 4216/1999, they were allowed to pay
duty on the basis of actual production. In compliance of the said order,
they recorded actual production in their books of account and paid the duty
accordingly. The above interim order was vacated by the final order dated
11.12.2002. During the period from April 2000 to February, 2001 except

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for the month of April 2000 and September 2000, Nil production was
recorded in remaining months. As they were not working during the entire
period except these two months, they are not liable to pay any duty and/or
interest. The closure of their unit is evident from their records which bear
endorsement by the Central Excise Officers who visited their premises and
found the unit closed.
• Vide Final order dated 11.10.2002, Hon’ble Gujarat High Court allowed
them to agitate against any action pursuant to the proceedings already
initiated under Section 3A of the Act, before its deletion. Therefore, it will
not be open to initiate recovery proceeding after deletion of Section 3A of
the Central Excise Act, 1944.
3. During hearing, learned Counsel argued that the department while
passing impugned order, has incorrectly relied on the judgment dated
24.11.2015 of Hon’ble Supreme Court in the case of Shree Bhagwati Steel
Rolling Mills. He has selectively placed reliance on the decision and completely
ignored the operative and binding directions laid down by the Hon’ble
Supreme court which has expressly declared that interest and penalty
provisions under Rule 96ZQ are invalid. This is not merely an observation of
the Apex Court but a binding ratio decided under Article 141 of the
Constitution of India and hence, must be strictly implemented. The learned
Adjudicating Authority has confirmed the demand of interest and also
imposed penalty on them under Rule 96ZQ which is contrary to the findings.
He also placed reliance on the decision of Hon’ble Gujarat High Court in the
case of Gopal Iron & Steel Co. (Gujarat) Ltd Vs. Union of India reported at
2024 (02) LCX 0545 dated 09.02.2024 which categorically held that no
proceedings can continue or be initiated under an omitted provision in the
absence of a saving clause. Learned Counsel pleaded that omission of Section
3A of the Central Excise Act, 1944 and its corresponding Rules including Rule
96 ZQ/96 ZP amounts to repeal. Once a provision stands omitted, it ceases

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to have legal existence unless expressly saved by the legislature. In the
absence of a saving clause, the department cannot initiate proceedings or
continue pending proceedings or pass any order under the omitted provision.
He therefore, pleads that the impugned order is without jurisdiction and
hence, it may be set aside and their appeal be allowed.
4. Learned AR on the other hand, placed reliance on the decision dated
24.11.2025 of Hon’ble Supreme Court in the case of M/s Shree Bhagwati Steel
Rolling Mills Vs. Commissioner of Central Excise & Ors. He argued that in the
referred judgment Hon’ble Supreme Court has discussed two issues, one
relating to effect of word “omission” and the other one on impact of deletion
of Rule 96 ZP, 96 ZO & 96 ZQ. He specifically draws attention to para 12 of
the said decision and pleads that the proceedings initiated for recovery of
duty under compounded levy scheme are legally sustainable. On imposition
of penalty and recovery of interest under the provisions of Rule ZQ (5)(i) &
(ii), he submits that the said rules have already been declared ultra vires by
Hon’ble Gujarat High Court, which order has also been sustained by Hon’ble
Apex Court. He therefore, pleads that the demand of Central Excise duty may
be sustained in the instant case.
5. We have heard pleadings from both sides. The issue before us is whether
proceedings for recovery of duty, interest and penalty can continue after
omission of Section 3A of the Central Excise Act, 1944 by Section 121 of the
Finance Act, 2001 without any saving clause?
5.1 We find that Hon’ble Gujrat High Court in the case of Krishna Processors
Vs. Union of India, reported at 2012 (280) ELT 186 (Guj.) has examined the
impact of omission of Rule 96 ZO, 96 ZP & 96 ZQ of erstwhile Central Excise
Rules, 1944 w.e.f. 01.03.2001 by Notification No. 6/2001-C.E.(N.T.), and of
Section 3A of the Central Excise Act, 1944 w.e.f. 11.5.2001, without any
saving clauses, on initiation of proceedings for recovery of liabilities incurred
under Section 3A. Hon’ble Court also considered the provisions of Section 6

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of the General Clauses Act, 1897 and Section 38A of the Central Excise Act,
1944. After considering various judgments, Hon’ble Court held that language
of preamble to Notification ibid, ‘except as respects things done or omitted to
be done before such amendment’ and its clause (7) omitting the above rules,
afforded protection only for pending proceedings already initiated while Rules
ibid were in force, and could not justify initiation of new proceeding after they
had ceased to exist. However, as “omission” did not amount to a repeal,
neither Section 6 of the General Clauses Act, 1897 nor Section 38A of the
Central Excise Act, 1944 ibid were applicable, and the proceedings/liabilities
incurred under omitted provisions, could not be saved. In that view, all
proceedings which were pending as on 11-5-2001, even if initiated prior to
omission of Rules ibid, would thereafter automatically lapse, and no orders
could have been passed if they were not concluded at the time of omission of
Section 3A ibid. Though w.e.f. 11.5.2001 Section 38A was introduced in
Central Excise Act, 1944 by Section 131 of the Finance Act, 2001 and Section
132 thereof validates all actions covered under it as if it had been in force at
all material times, it was applicable only for the period till Section 3A ibid was
omitted.
5.2 We further find that the issue of imposition of penalty and recovery of
interest on the duty amount under Rule 96 ZO, 96 ZP or 96 ZQ came up for
consideration before Hon’ble Apex Court in the case of M/s Shree Bhagwati
Steel Rolling Mills (cited supra). After examining various provisions, Hon’ble
Supreme Court observed as under :-
“12. First and foremost, it is important to refer to the definition of “enactment”
contained in Section 3(19) of the General Clauses Act. The said definition clause
states that “enactment” shall mean the following :
“enactment” shall include a Regulation (as hereinafter defined) and any
Regulation of the Bengal, Madras or Bombay Code, and shall also include
any provision contained in any Act or in any such Regulation as aforesaid.”
13. From this, it is clear that when Section 6 speaks of the repeal of any
enactment, it refers not merely to the enactment as a whole but also to any

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provision contained in any Act. Thus, it is clear that if a part of a statute is
deleted, Section 6 would nonetheless apply. Secondly, it is clear, as has been
stated by referring to a passage in Halsbury’s Laws of England in the Fibre
Board’s judgment, that the expression “omission” is nothing but a particular
form of words evincing an intention to abrogate an enactment or portion thereof.
This is made further clear by the Legal Thesaurus (Deluxe Edition) by William
C. Burton, 1979 Edition. The expression “delete” is defined by the Thesaurus as
follows :
“Delete : Blot out, cancel, censor, cross off, cross out, cut, cut out, dele,
discard, do away with, drop, edit out, efface, elide, eliminate, eradicate,
erase, excise, expel, expunge, extirpate, get rid of, leave out, modify by
excisions, obliterate, omit, remove, rub out, rule out, scratch out, strike off,
take out, weed wipe out.”
Likewise the expression “omit” is also defined by this Thesaurus as follows :
“Omit : Abstain from inserting, bypass, cast aside, count out, cut out, delete,
discard, dodge, drop exclude, exclude, fail to do, fail to include, fail to insert,
fail to mention, leave out, leave undone, let go, let pass, let slip, miss,
neglect, omittere, pass over, praetermittere, skip, slight, transire.”
And the expression “repeal” is defined as follows :
“Repeal : Abolish, abrogare, abrogate, annul, avoid, cancel, countermand,
declare null and void, delete, eliminate, formally withdraw, invalidate, make
void, negate, nullify, obliterate, officially withdraw, override, overrule, quash,
recall, render invalid, rescind, rescindere, retract, reverse, revoke, set aside,
vacate, void, withdraw.”
14. On a conjoint reading of the three expressions “delete”, “omit”, and
“repeal”, it becomes clear that “delete” and “omit” are used interchangeably, so
that when the expression “repeal” refers to “delete” it would necessarily take
within its ken an omission as well. This being the case, we do not find any
substance in the argument that a “repeal” amounts to an obliteration from the
very beginning, whereas an “omission” is only in futuro. If the expression
“delete” would amount to a “repeal”, which the Appellant's counsel does not
deny, it is clear that a conjoint reading of Halsbury’s Laws of England and the
Legal Thesaurus cited hereinabove both lead to the same result, namely that an
“omission” being tantamount to a “deletion” is a form of repeal.
31. Applying the Constitution Bench decision stated above, it will have to be
declared that since Section 3A which provides for a separate scheme for availing
facilities under a compound levy scheme does not itself provide for the levying
of interest, Rules 96ZO, 96ZP and 96ZQ cannot do so and therefore on this
ground the Appellant in Shree Bhagwati Steel Rolling Mills has to succeed. On
this ground alone therefore the impugned judgment is set aside. That none of

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the other provisions of the Central Excise Act can come to the aid of the Revenue
in cases like these has been laid down by this Court in Hans Steel Rolling Mill v.
CCE, (2011) 3 SCC 748 as follows :
13. On going through the records it is clearly established that the Appellants are
availing the facilities under the compound levy scheme, which they themselves
opted for and filed declarations furnishing details about the annual capacity of
production and duty payable on such capacity of production. It has to be taken
into consideration that the compounded levy scheme for collection of duty based
on annual capacity of production under Section 3 of the Act and the 1997 Rules
is a separate scheme from the normal scheme for collection of Central excise
duty on goods manufactured in the country. Under the same, Rule 96ZP of the
Central Excise Rules stipulate the method of payment and Rule 96ZP contains
detailed provision regarding time and manner of payment and it also contains
provisions relating to payment of interest and penalty in event of delay in
payment or non-payment of dues. Thus, this is a comprehensive scheme in itself
and general provisions in the Act and the Rules are
excluded. (at page 751)
33. On the facts before the Gujarat High Court, there were three civil
applications each of which challenged the constitutional validity of the aforesaid
rules insofar as they prescribed the imposition of a penalty equal to the
amount of duty outstanding without any discretion to reduce the same
depending upon the time taken to deposit the duty. The Gujarat High
Court struck down the aforesaid Rules on the basis that not only were they ultra
vires the Act but they were arbitrary and unreasonable and therefore, violative
of Articles 14 and 19(1)(g) of the Constitution.
34. Shri Radhakrishnan, learned senior advocate appearing on behalf of the
Revenue found it extremely difficult to argue that the aforesaid judgment was
wrong. He therefore asked us to limit the effect of the judgment when it further
held that after omission of the aforesaid Rules with effect from 1-3-2001, no
proceedings could have been initiated thereunder. In this submission, he is
correct for the simple reason that the Gujarat High Court followed
Rayala Corporation in holding that “omissions” would not amount to
“repeals”, which this Court has now clarified is not the correct legal position.
44. Conclusion
We have declared in this judgment that the interest and penalty provisions
under the Rules 96ZO, ZP, and ZQ of the Central Excise Rules, [1944] are invalid
for the reasons assigned in the judgment. Accordingly, the appeals filed by the
Revenue are dismissed and the appeals filed by the Assessees are allowed to
the extent indicated above. It may be noted that in an appeal from a judgment
of the Allahabad High Court dated 8-11-2012 in SLP (C) No. 9796/2012, it has
been held that the levy of penalty under the aforesaid provisions is mandatory

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in character. In view of what has been held by us today, this appeal will also
have to be allowed in the same terms as the other Assessees’ appeals which
have been allowed. All the aforesaid appeals are disposed of accordingly.”
5.3 Similar issue also came up for consideration before Hon’ble Bombay
High Court in the case of Mohit Ispat Ltd Vs. Commissioner of Customs, C.
Ex. & S.T. Panaji reported 2019 (369) ELT 175 (Bom.) where the learned
Commissioner had confirmed the duty demand based on annual production
capacity so determined and the interest under Rule 96 ZO of the said Rules.
After considering various decisions including decision of Hon’ble Karnataka
High Court in Bhuwalka Steel Industries Vs. Union of India reported at 2003
(159) ELT 147 (Kar.) and decision M/s Shree Bhagwati Steel Rolling Mills (cited
supra), Hon’ble Bombay High Court arrived at the following conclusion:-
“(A) The impugned orders, to the extent they demand/ confirm the levy of
interest on the Assessee, are quashed and set aside.
(B) However, the impugned orders to the extent they demand or confirm
the levy of excise duty as specified, are not interfered with.
(C) There shall be no order as to costs.”
5.4 We further find that the similar issue relating to duty demand under
Section 3A come for decision before Hon’ble Rajasthan High Court in the case
of Commissioner of Central Excise, Jaipur-I Vs. Savitri Concast Ltd. reported
at 2018 (360) ELT 241 (Raj.). The Hon’ble Court made the following question
of law:-
“(i) Whether the omission of Section 3A of the Central Excise Act, 1944 by
Section 121 of Finance Act, 2001, without any saving clause would affect the
proceedings in respect of which decision has already been taken prior to the
date of omission?
(ii) Whether the CESTAT was correct in holding that the saving provisions of
Section 6 of the General Clauses Act, 1897 were not applicable to ‘omission’ of
Section 3A of the Central Excise Act, 1944 which was omitted vide Section 121
of Finance Act, 2001?
(iii) Whether the CESTAT was correct in holding that there is no saving clause
provided in Section 121 or any other Section of Finance Act, 2001 ignoring

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Section 131 of the Finance Act, 2001 which inter alia provided for saving clause
for Rules, Notification or Orders?
(iv) Whether the CESTAT was correct in law in holding that Rule 96ZO of the
Central Excise Rules, 1944 will not survive beyond 11-5-2001 i.e. the date of
omission of Section 3A of the Central Excise Act, 1944 vide Section 121 of the
Finance Act, 2001, while not considering the provisions of Section 131 of the
Finance Act, 2001?”
After discussing the decision of Hon’ble Supreme Court in Shree Bhagwati
Steel Rolling Mills case Hon’ble court in para 7 held that “the issues are
answered in favour of department.
5.5 We however find that Hon’ble Gujarat High Court in the matter of Gopal
Iron and Steel Co. (Gujarat) Ltd Vs. Union of India in Civil application No. 501
of 2011 decided vide their order reported at 2024 (02) LCX 0545 that the
proceedings under Section 3A would not continue once this Section is omitted
w.e.f. 11.05.2001. The Hon’ble Court also considered their decision in Krishna
Processors case which was upheld by Hon’ble Supreme Court, decisions of
Hon’ble Supreme Court in the case of M/s Shree Bhagwati Steel Rolling Mills
and in the case of M/s Fiber Boards Pvt Ltd, Bangalore reported at 2015 (376)
ITR 596 (SC). After discussing various provisions, Hon’ble Court concluded
that since the aforesaid rule was omitted w.e.f. 01.03.2001 and Section 3A
was also omitted w.e.f. 11.05.2001, the proceedings cannot be continued for
recovery of compounded levy amount from the petitioner company. In para
30 and 31 of the decision, Hon’ble Court has observed as under:-
“30. In view of the above conspectus of law, neither Section 3A nor Rule 96 ZP
existed on the statute book when the Commissioner passed the order in
November 2010 as the aforesaid provisions have been omitted vide notification
no.6/2001 dated 01.03.2001, the aforesaid rule was omitted whereas Section
3A came to be omitted vide Section 121 of the Finance Act 2001, which would
amount to repeal of Section 3A as well as Rule 96(ZP). When the order dated
09/10 April, 2003 was passed by the Commissioner against which the appeal
was preferred before the Appellate Tribunal, the provisions were omitted. We
are therefore of the opinion that in view of the omission of the provision which
would amount to repeal, the Commissioner had no jurisdiction to take any action
including passing of any order fixing APC or to pass an order of recovery of the

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compounded levy amount from the petitioner company. Therefore, the
impugned order dated 18.11.2010 passed by the Commissioner is hereby
quashed and set aside being without jurisdiction as no orders could have been
passed against the petitioners under the said provision as the action initiated
against the petitioner was not finally concluded at the time of omission/ repeal
of the provisions.
31. The petition therefore succeeds and is accordingly allowed. The impugned
order dated 18.11.2010 passed by the Commissioner of Central Excise
Ahmedabad-II is hereby quashed and set aside on the ground that no
proceedings were permissible against the petitioner company for recovery of the
compounded levy amount for years 1998-1999 and 1999-2000, because when
the impugned order was passed, the provision of Section 3A of the Act read with
Rule 96ZP of the Rules and the notification were omitted and repealed in
absence of any saving clause with effect from 2001. Rule is made absolute to
the aforesaid extent. No order as to costs.”

5.6 We also find that Hon’ble Supreme Court in the case of M/s Shree
Bhagwati Steel Rolling Mills (cited supra) also considered their decision in the
case of M/s Fiber Boards Pvt Ltd (cited supra) wherein after referring to
several decisions of the Apex Court, GP Singhs Principles of statutory
interpretation, Section 6A of the General Clauses Act, 1897, and a passage in
Halsbury’s, laws of England it was held that an “omission” would amount to a
“repeal” for the purpose of Section 24 of the General Clauses Act, 1897. Since
same expression, namely, repeal is used both in Section 6 & Section 24 of the
General Clauses Act, the construction of the said expression in both Sections
would, therefore, include within its “omissions” made by the legislature. After
referring to the decision of constitution bench in Rayala Corporation Pvt Ltd
and Ors. Vs. Director of Enforcement, New Delhi reported at 1969 (2) SCC
412, Hon’ble Apex Court in para 13 held that it is clear that when Section 6
speaks of “repeal” of any enactment, it refers not merely to the enactment
as a whole but also to any provision contained in any Act. Thus, if a part of a
statute is deleted, Section 6 would nonetheless apply. Secondly, it is also
clear, as has been stated by referring to a passage in Halsbury’s Laws of
England in the Fibre Board’s judgment, that the expression “omission” is

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nothing but a particular form of words evincing an intention to abrogate an
enactment or portion thereof.
5.7 In view of the above, following the decision of Hon’ble Supreme Court
in the case of M/s Shree Bhagwati Steel Rolling Mills we hold that the duty
demand adjudged by the learned Commissioner vide impugned order after
omission of Section 3A of the Central Excise Act, 1944 will survive. As far as
his order relating to recovery of interest on the above duty amount and the
penalty amount. We set aside the same. The impugned order is therefore
upheld to the extent of confirmation of central excise duty only. The demand
of interest and penalty is set aside.
6. The appeal is partly allowed in above terms.
(pronounced in the open court on 29.10.2026)







(Dr. AJAYA KRISHNA VISHVESHA)
MEMBER ( JUDICIAL )






(SATENDRA VIKRAM SINGH)
MEMBER ( TECHNICAL )
Raksha