2009 (3) TMI 687 - AT - Central Excise

Summary

Issues:
1. Liability to pay interest on belatedly paid duty under Rule 8(3) of Central Excise Rules, 2002.
2. Reasonableness of penalty imposed under Rule 25 of Central Excise Rules, 2002.

Issue 1: Liability to pay interest on belatedly paid duty under Rule 8(3) of Central Excise Rules, 2002:

The case involved a question of whether the appellants were liable to pay interest on the belatedly paid duty at the rate of Rs. 1,000/- per day as per Rule 8(3) of the Central Excise Rules, 2002. The due date for payment of duty was 31-3-2004, and the assessee paid the duty on 20-12-2004, with a delay of 264 days. The original authority had ordered the recovery of interest on the duty amount at Rs. 1,000/- per day, totaling Rs. 2,64,000, under Rule 8(3) read with Section 11AB of the Central Excise Act. However, the Tribunal noted that the expression "at the rate of 2% per month or Rs. 1,000/- per day, whichever is higher" in Rule 8(3) was invalidated by the Rajasthan High Court. The Central Government had amended the provision under Notification No. 17/2005-C.E. (N.T.), dated 31-3-2005, specifying that the interest rate should be as notified under Section 11AB. As the appellants had paid interest at 13% per annum, the rate notified by the Central Government for the material period, the Tribunal held that any additional levy of interest was illegal. Therefore, the order seeking to levy such interest was set aside.

Issue 2: Reasonableness of penalty imposed under Rule 25 of Central Excise Rules, 2002:

The second issue pertained to the penalty of Rs. 10,000 imposed on the assessee under Rule 25 of the Central Excise Rules, 2002. The Commissioner (Appeals) had upheld this penalty. The Tribunal, after considering the arguments, found that the penalty imposed was reasonable and in accordance with the provisions of Rule 25 read with Section 11AC of the Central Excise Act. Consequently, the Tribunal held that the order imposing the penalty of Rs. 10,000 on the assessee under Rule 25 could not be faulted. Therefore, the appeal was allowed in part, setting aside the levy of additional interest but upholding the penalty imposed under Rule 25.

This detailed analysis of the judgment from the Appellate Tribunal CESTAT, Mumbai, highlights the issues of interest liability and penalty imposition under the Central Excise Rules, 2002, providing a comprehensive understanding of the Tribunal's decision on each issue.