2015 (10) TMI 2549 - AT - Central Excise

Clearance of goods without payment of duty - invoices supplied to buyer without supplying the goods enabling the buyers to avail Cenvat credit on the strength of invoices - availing of CENVAT credit fraudulently - SSI exemption - whether demand of interest u/s 11AB of the Act justified? - Held that - during the impugned period, provision of Section 11AB of the Act were not in force which were introduced with effect from 28-9-1996 and the period involved is prior to that date. Therefore, the demand of interest confirmed against the appellant is set aside as there was no provision to demand interest during the relevant time. Imposition of penalty u/r 173Q of the Erstwhile Rules - Held that - I have gone through the provisions of Rule 173Q wherein for certain contravention by the assessee, the goods are to be held liable for confiscation and thereafter penalties are imposable. I have gone through the impugned order wherein the goods are not held liable for confiscation and penalty have been imposed on the appellant. Further, I find that no specific clause of Rule 173Q has been mentioned in the impugned order to impose penalty on the appellant. Therefore, relying on the decision of Hon ble Apex Court in the case of AMRIT FOODS Versus COMMISSIONER OF CENTRAL EXCISE, UP. 2005 (10) TMI 96 - SUPREME COURT OF INDIA , I hold that penalty under Rule 173Q of the Rules is not imposable on the appellant. Demand of interest and penalty not sustainable - appeal allowed - decided in favor of appellant.

Summary

Issues:
Appeal against demand of interest under Section 11AB and penalty under Rule 173Q of Central Excise Rules, 1944.

Analysis:
The appellant, a manufacturer of super enameled copper wire, faced a demand for interest under Section 11AB and a penalty of Rs. 3 lakhs under Rule 173Q of Central Excise Rules, 1944. The case involved the clearance of goods without duty payment and issuing invoices without supplying goods to enable buyers to avail Cenvat credit fraudulently. A search revealed incriminating documents leading to a show cause notice for duty demand on bogus invoices, interest, and penalty. The Tribunal remanded the matter for quantification, where the demand was reduced after giving SSI exemption benefit. The appellant had paid a portion before the notice, and the remaining amount was demanded along with interest and penalty. The appellant challenged the order.

The appellant argued that during the relevant time, Section 11AB was not in force, so interest could not be demanded. Additionally, Rule 173Q was superseded without a saving clause, making the penalty inapplicable. The penalty was also contested for lack of specifying the non-compliance clause. The AR supported the impugned order, stating the offence warranted the penalty. After hearing both sides, the Tribunal found that interest demand under Section 11AB was not valid as the provision was not in force during the period in question. Regarding the penalty under Rule 173Q, it was observed that the goods were not liable for confiscation, and no specific clause was cited for imposing the penalty, leading to its dismissal based on legal precedents.

In conclusion, the Tribunal set aside the impugned order, allowing the appeal by rejecting the demand for interest and penalty. The decision was made after considering the arguments and records presented by both parties.