2011 (6) TMI 423 - AT - Central Excise

Default in payment of duty - balance paid later after delays ranging from 5 days to 85 days - violation of rule 8 of Central Excise Rules - Held that - The appellants have failed to pay duty in full for the six months within due dates but made payment only partly therefore, the clearances effected during the impugned months are deemed to be non duty paid clearances and penal consequences under Central Excise Rules consequently follow. These cases, however, cannot attract the provisions of Section 11AC which is clear from the wording of the Rule 8 (3). Thus levy of the interest at the rate of Rs.1,000/- per day is ultra vires to Section 11AB appeals are disposed of. Penalty of Rs.5,000/- only for every month of default.

Summary

Issues:
Appeals involving common issue arising from a common order-in-appeal regarding default in payment of duty, imposition of penalties under Central Excise Rules, and interest calculation under Section 11AB.

Analysis:

1. Default in Payment of Duty:
The appellants defaulted in paying duty for several months, leading to penalties under Rule 8(3) of Central Excise Rules. The original authority confirmed the demand of interest equal to the defaulted duty amount and imposed penalties under Rule 25 of Central Excise Rules and in one case under Section 11AC. The appellants argued that the delays were due to financial crisis, not evasion of duty, and that they paid the balance with interest under Section 11AB. The Tribunal noted the delays and deemed the clearances as non-duty paid, justifying penalties under Central Excise Rules.

2. Penalties Imposition:
The learned Advocate for the appellants contended that if penalties were to be imposed, they should be under Rule 27 of Central Excise Rules, not under Section 11AC. The Tribunal agreed, stating that penalties were warranted under Central Excise Rules only. Considering the circumstances, the Tribunal emphasized leniency in determining the quantum of penalties imposed.

3. Interest Calculation under Section 11AB:
The appellants challenged the interest calculation, citing a Rajasthan High Court decision that deemed the daily interest rate of Rs.1,000 as ultra vires to Section 11AB. The Tribunal acknowledged this and directed the original authority to recalculate the interest, ignoring the daily rate and determining it at the rate specified in the rules. The Tribunal emphasized that the interest payable should not exceed the defaulted duty amount.

In conclusion, the Tribunal disposed of the appeals by imposing a penalty of Rs.5,000 for each month of default and instructed the recalculation of interest by the original authority in line with the observations made, ensuring a reasonable opportunity for the appellants to be heard.