2004 (6) TMI 451 - AT - Central Excise

Summary

Issues:
Confirmation of interest and penalty under Rule 96ZO(3) for failure to discharge duty in time.

Analysis:
The appeal was filed against the impugned order-in-appeal where the appellants challenged the confirmation of interest and penalty under Rule 96ZO(3) for failing to discharge duty on time. The appellants contested the penalty of Rs. 5,000 under the rule, arguing that Proviso III to Rule 96ZO(3) was not in effect during the period of default (1-9-1997 to 31-3-1998) and therefore could not be invoked.

Upon hearing both sides and examining the record, it was found that Proviso III to Rule 96ZO(3) became effective from 1-4-1998, and prior to that, only interest could be charged from the defaulter. Consequently, the penalty under Proviso III could not be imposed on the appellants and was set aside. The imposition of interest under Rule 96ZO(3) was not contested by the appellants' counsel. Despite the appellants' belief contesting their duty liability, the imposition of interest was deemed mandatory as they failed to discharge duty as per the rule.

The appellants' argument that they were working under a bona fide belief and contested their duty liability was not legally accepted. Even though a previous Tribunal judgment favored the appellants, it was later reversed by the Apex Court. The appellants were held liable to pay interest specified in Rule 96ZO(3) for withholding duty amount illegally by not depositing it with the Government on time, even under protest. Therefore, the impugned order confirming interest was upheld, while the penalty was set aside.

In conclusion, the impugned order confirming interest on the appellants was upheld, while the penalty was set aside, leading to the disposal of the appeal in favor of the appellants.