2008 (7) TMI 679 - AT - Central Excise

Summary

Issues involved: Challenge against demand of interest and imposition of penalties u/s Rule 173GG and Rule 173Q of Central Excise Rules, 1944.

Summary:
1. The appellants defaulted in payment of duty for Nov'99 and the following month, which were paid later. The department issued a show-cause notice proposing interest and penalties. The original authority imposed penalties and demanded interest. The appeal against this decision was rejected by the Commissioner (Appeals).

2. In the present appeal, the assessee challenged the demand of interest and penalties. The counsel relied on the Explanation to Section 132 of the Finance Act, 2001, and a decision of the apex court in support of the challenge. After hearing both parties, it was noted that the Rule providing for penalties and interest was omitted on 1-4-2000 without any saving clause. The Finance Act, 2001 introduced Section 38A, which protected actions taken under omitted rules retrospectively. The Explanation to Section 132 protected persons targeted by such actions from penalties. The appellants were entitled to this benefit, and the penalties imposed were vacated.

3. Regarding interest, the liability to pay interest arises on default and is considered a quasi-punishment. Citing an apex court judgment, interest on duty cannot be recovered retrospectively as it would be akin to punishment. Therefore, the benefit of the Explanation to Section 132 of the Finance Act, 2001 extended to interest as well. The impugned order was set aside, and the appeal was allowed.