2009 (12) TMI 533 - AT - Central Excise

Interest on delayed payment of duty assessee not liable to interest prior to 11-5-2001 - differential amount of duty was paid by the assessee under Section 11(2B) of the Act, interest thereon was liable to be recovered under Section 11AB of the Act for the period of delay - no reliance is placed on sub-section (2B) of Section 11A - no interest on duty can be levied under sub-section (1) for any period prior to 11-5-2001. The period of dispute in the instant case is 5-7-2000 to 15-5-2001, which, barring a few days, is covered by sub-section (2) of Section 11AB - penalty under Section 11AC was alleged in the show-cause notice Held that - authority impose a penalty on the assessee under the above provisions of law. This is the legal position clearly emerging from the Hon ble Supreme Court s judgment in Dharamendra Textile Processors (supra) and has been clarified in Rajasthan Spinning & Weaving Mills (supra). In the present case, as already noted, there is no allegation in the show cause notice for a penalty under Section 11AC and, therefore, the appellant has not made out a case for such a penalty on the respondent.

Summary

Issues:
1. Whether interest under Section 11AB is recoverable from the respondent on the differential amount of duty paid by them.
2. Whether penalty under Section 11AC is liable to be imposed on them in this case.

Analysis:
1. The respondent reversed CENVAT Credit on certain inputs and paid the differential duty amount in June 2001. A show-cause notice was issued proposing to levy interest under Section 11AB and penalty under Section 11AC. The original authority dropped the interest and penalty, but the department appealed. The appellate authority dismissed the appeal, stating that Sections 11AB and 11AC were not applicable as duty was paid before the notice. The Revenue appealed this decision. The D.R. argued for interest under Section 11AB and penalty under Section 11AC, citing relevant case laws. The Counsel for the respondent argued against penalty under Section 11AC, citing case law. The Tribunal analyzed Section 11AB and found that interest cannot be levied for the period before 11-5-2001 as per sub-section (2) of Section 11AB. Interest could only be levied for the period after 11-5-2001. The Tribunal concluded that no interest was leviable on the differential duty paid before 11-5-2001, except for a brief period from 11-15-5-2001. The Tribunal referred to SKF India Ltd case to support its decision.

2. The Tribunal noted that no ingredients for penalty under Section 11AC were alleged in the show-cause notice. It reiterated the legal position that penalty under Section 11AC can only be imposed if the ingredients (fraud, collusion, suppression of facts, etc.) are established and alleged in the notice. Citing Rajasthan Spinning & Weaving Mills case, the Tribunal emphasized that at least one ingredient must be alleged in the notice for a penalty to be imposed under Section 11AC. Since no such allegation was made in the present case, the Tribunal held that the appellant had not made a case for imposing a penalty under Section 11AC on the respondent.

In conclusion, the Tribunal disposed of the appeal in favor of the respondent, ruling out the levy of interest under Section 11AB for the period before 11-5-2001 and rejecting the imposition of a penalty under Section 11AC due to the absence of relevant allegations in the show-cause notice.