2008 (7) TMI 768 - AT - Central Excise

Summary

Issues involved: Challenge against penalty and interest imposed by the Commissioner (Appeals) u/s 11AC and Rule 25.

Summary:
The appeal was filed against the Order-in-Appeal No. 59/2007 (H-IV) CE dated 31-10-2007 passed by the Commissioner (Appeals) II Hyderabad. The appellants had not adopted proper valuation for goods cleared from the Depot and Consignment Agent, instead using the factory gate price. Despite an audit not pointing out the discrepancy, the appellants voluntarily paid the differential duty. The Revenue initiated proceedings and imposed penalties under 11AC and Rule 25, along with demanding interest. The Commissioner (Appeals) upheld the penalty under 11AC but set aside the penalty under Rule 25, while also confirming the interest demand.

The appellants contested the imposition of penalties, claiming no malafide intent and arguing that they paid the duty before any Show Cause Notice was issued. They cited case laws to support their position that penalty is not applicable when duty is paid before a Show Cause Notice. They also sought to have the interest demand set aside.

Upon careful consideration, the Tribunal found that the appellants had a genuine doubt regarding duty payment for goods cleared from the Depot and Consignment Agent premises. Therefore, the Tribunal ruled that penalty was unwarranted. However, the Tribunal upheld the interest liability as a statutory requirement, stating that when duty paid is less on the date of clearance, interest accrues on the differential duty paid later. The Tribunal allowed the appeal to the extent of setting aside the penalty but maintained the interest payment.

*(Pronounced in open Court on 28-7-2008)*