2011 (3) TMI 1132 - AT - Central Excise

Facility of filing ER-1 return on quarterly basis availed - as per revenue it is contravention of the provisions of Rule 12 of the said Rules - dept. confirmed the demand of interest and imposed penalty - Held that - As decided in Lucid Colloids case 2005 (8) TMI 134 - HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR to the extent rule provides other than the rate of interest as an alternative mode of levy of interest per day not connected with the amount of duty in default is beyond the enabling power of the Parent Act and has further held that Rule 8(3) to the extent it provides levy of interest @ Rs. 1,000/- which is higher as alternative to charge of interest @ 2% on the amount of duty means to be understood as 24% p.a. on the amount of duty in default is ultra vires to Section 11AB of the Act and cannot be sustained and is held inoperative. Apparently, the authority below was not justified in confirming the demand of interest @ Rs. 1,000/- per day for the relevant period. Thus matter is remanded to the Commissioner to recalculate the interest bearing in mind the law applicable to the facts of the case and the decision of the Rajasthan High Court. As regards the penalty is concerned there is no finding either by the authority below to the effect that the delay in payment of duty was with intention to evade the duty. In the absence of any such finding, obviously, the penalty under Rule 25(d) is not sustainable as rightly pointed out by the appellants. The penalty can be justified in terms of Rule 27 of the said rules and maximum limit thereunder is Rs. 5,000/- and not Rs. 20,000/-.

Issues:
1. Dismissal of appeal by Commissioner (Appeals) against order of adjudicating authority.
2. Non-payment of duty in accordance with Central Excise Rules, 2002.
3. Imposition of interest and penalty on appellants.
4. Applicability of interest rate and penalty provisions under Central Excise Rules.
5. Amended rules and retrospective effectiveness.
6. Interpretation of provisions by Rajasthan High Court.
7. Justification of penalty under Rule 25.
8. Calculation and reduction of penalty amount.

Detailed Analysis:
1. The appeal before the Appellate Tribunal arose from the dismissal of the appeal by the Commissioner (Appeals) against the order of the adjudicating authority, which had imposed interest and penalty on the appellants for non-payment of duty in accordance with the Central Excise Rules, 2002.

2. The appellants, engaged in the manufacture of specific goods, had not paid the duty as per the law, crossed the small-scale exemption limit, and failed to pay duty by the specified deadline even after losing the status of a small-scale industry unit. This led to the issuance of a show cause notice, subsequent rejection of contentions by the Assistant Commissioner, and the imposition of interest and penalty.

3. The learned Advocate for the appellants argued, citing relevant legal precedents, that the calculation of interest at a specific rate per day was ultra vires, and the penalty provision under Rule 25 was not applicable without the intention to evade duty. The Department acknowledged the non-retrospective effect of amended rules.

4. The Tribunal, considering the Rajasthan High Court's decision, held that the interest calculation method was beyond the statutory power and confirmed that the interest should be levied within permissible limits. The Tribunal also noted the absence of findings regarding the intention to evade duty, making the penalty under Rule 25 unsustainable.

5. Consequently, the Tribunal set aside the order confirming interest at a specific rate per day, remanding the matter for recalculation in line with applicable law and the Rajasthan High Court decision. The penalty was reduced to the maximum limit permissible under Rule 27, highlighting the need for justifications and findings regarding penalty imposition.

6. In conclusion, the appeal was allowed, the impugned order was set aside, and the matter was remanded for recalculating the interest amount and reducing the penalty to the appropriate limit under the Central Excise Rules.

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