2011 (1) TMI 1006 - AT - Central Excise

Interest and penalty - short payment of duty on the clearance made by the respondent without following the Rule 8 of Central Excise Rules, 1944 - liability to pay interest - Held that - Force in the contention of assessee that the provisions of Section 11AB of the Act came into force with effect from 11.5.2001. Hence, no interest for the period prior to 11.5.2001 is payable by the respondent. The respondent is liable to pay interest for the period from 11th May 2001 to June, 2001 as per the show-cause notice. As there is no quantification of interest for the impugned period as per the impugned order, the matter is sent back to the adjudicating authority for the purpose of quantification of interest on short payment of duty paid by the respondent during the period 11th May, 2001 to June 01, after following the principle of natural justice.

Summary

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

Analysis:

1. Facts of the Case:
A search revealed shortages of inputs at the factory premises of the respondent. The respondent cleared goods to another unit without following Rule 8 of Central Excise Valuation Rules. The respondent paid differential duty on the shortage of finished goods, along with interest. A show-cause notice was issued, and penalties were imposed by the adjudicating authority. The Commissioner (Appeals) modified the order, dropping the interest and penalties, leading to the Revenue's appeal.

2. Arguments by the Learned DR:
The case involved short payment of duty without following rules, leading to suppression of facts. The DR argued for the confirmation of interest payment, citing a relevant decision.

3. Arguments by the Respondent's Advocate:
The respondent's advocate argued that no suppression of facts or intentional evasion of duty was alleged in the show-cause notice. Referring to a specific case, it was contended that penalties were not applicable. The interest was deemed not payable due to the nature of clearances to a sister unit and the neutrality of the exercise.

4. Judgment and Analysis:
The Tribunal examined the submissions and the show-cause notice. It was noted that no allegations of deliberate deception or contravention were made against the respondent, hence no penalty was warranted. The Tribunal emphasized the importance of the show-cause notice as the foundation of the case. Interest was deemed payable for the period after 11th May 2001, as per Section 11AB, but not for the period prior to that date. The matter was remanded to the adjudicating authority for quantification of interest for the specified period.

5. Conclusion:
The appeal was disposed of, with the Tribunal upholding the dropping of penalties and interest under Section 11AB for the period before 11th May 2001. The case highlighted the necessity of specific allegations in the show-cause notice to justify penalties. The Tribunal emphasized the importance of following legal provisions and principles in determining duty liabilities and interest payments.