2006 (9) TMI 447 - Commissioner - Central Excise

Summary

Issues Involved:
1. Whether the appellants are required to pay interest u/s 11AB of the Central Excise Act, 1944.
2. Whether the penalty imposed under Rule 25 of the Central Excise Rules, 2002 is justified.

Summary:

Issue 1: Interest u/s 11AB of the Central Excise Act, 1944
The appellants cleared their products to their sister concern on the basis of valuation from the previous year's financial accounts. Upon finalizing the current year's balance sheet, they found the valuation higher and issued supplementary invoices, paying the differential duty but not the interest. The lower authority confirmed the interest amounting to Rs. 60,976/- u/s 11AB. The appellants argued that they discharged the duty liability as per the valuation available at the time of clearance and paid the differential duty immediately upon finalization of accounts, thus no interest should arise. They cited various case laws to support their claim that no interest is payable if duty is paid before the issue of a Show Cause Notice. However, the judgment clarified that u/s 11AB, effective from 11-5-01, interest is payable irrespective of whether the duty is paid before the Show Cause Notice, as the pre-requisite of suppression of facts was removed. The judgment concluded that the appellants are required to pay interest as ordered by the lower authority.

Issue 2: Penalty under Rule 25 of Central Excise Rules, 2002
The lower authority imposed a penalty of Rs. 15,000/- under Rule 25. The appellants contended that they paid the duty before the Show Cause Notice, and thus no penalty should be imposed. The judgment acknowledged the appellants' compliance in paying the duty but noted that the delay in payment, although inevitable, still existed. Considering the facts and circumstances, the judgment reduced the penalty from Rs. 15,000/- to Rs. 5,000/-.

Conclusion:
The appeal was disposed of with the requirement for the appellants to pay the interest u/s 11AB as upheld by the lower authority, and the penalty was reduced to Rs. 5,000/-.