2009 (7) TMI 1327 - AT - Central Excise

Summary

Issues involved: Challenge to order setting aside demand for interest and penalty based on delay in payment of excise duty.

Summary:
The appeal arose from an order passed by the Commissioner (Appeals), Chandigarh, setting aside the demand for interest and penalty due to the duty amount being deposited before the show cause notice was issued, despite a delay in payment as per the law. The challenge to the order was centered around the argument that the relevant provisions of Rule 96ZO and 96ZQ of the Central Excise Rules did not allow any discretion in imposing penalty or interest in case of delayed payment of excise duty.

The appellant relied on a decision of the Hon'ble Supreme Court in the case of Union of India vs. Dharamendra Textile Processors to support their position. The records confirmed the delay in payment of excise duty by the respondent, although the duty was paid before the show cause notice was issued, along with part of the interest. The Commissioner (Appeals) referred to a decision of the Larger Bench in the case of CCE vs. Machino Montell and concluded that payment of duty before the notice did not justify imposing a penalty, thus setting aside the direction for penalty and interest.

The provisions of law regarding interest on delayed duty payment and the authority's obligation to demand interest and impose penalty were deemed clear. The decision of the Larger Bench in Machino Montell was considered not good law, especially since it had been set aside by the Hon'ble Punjab & Haryana High Court. The order was set aside, and the original authority's decision was restored based on the clarity provided by the Apex Court in the Dharamendra Textile Processors case.

In conclusion, the impugned order was not sustainable, and the appeal was allowed, disposing of the matter accordingly.