2012 (4) TMI 309 - HC - Central Excise

Voluntary payment of duty u/s 11A(2B) - Time limitation - Interest as per the provisions of Explanation 2 to Section 11A(2B) - Rule 25 of the Central Excise Rules - learned counsel for the Department and having perused the documents on record, as already noted, the finding of the Commissioner that there was no suppression or mis-declaration on the part of the respondent has achieved finality - It can be seen that under sub-Section (1) period of limitation for issuing notice for recovery of duty not paid, short paid or erroneously refunded is one year unless, of course, such non-payment, short payment, or erroneous refund of duty arises by the reason of fraud, collusion or wilful misstatement or suppression of facts or contraventions of the provisions of the Act or the Rules with intent to evade payment of duty - In the present case, when the period of limitation had already expired and when the extended period beyond one year was not available to the department as held by the Commissioner himself in his order in original, to our mind the respondent was not liable to pay even the basic duty - If by efflux of time and in absence of availability of extended period of limitation, such show cause notice itself had become time barred, any payment made voluntarily by the manufacturer cannot be viewed as one made under sub-Section (2B) of Section 11A - Appeal is dismissed

Summary

Issues:
1. Consideration of voluntary payment of duty under Section 11A(2B)
2. Error in allowing appeal on grounds of limitation under Section 11A(2B)
3. Confirmation of interest on duty paid voluntarily under Explanation 2 to Section 11A(2B)

Analysis:
1. The case involved a manufacturer who voluntarily paid excise duty before a show cause notice was issued. The Commissioner issued a notice for recovery of duty, interest, and penalty. The Commissioner found no intent to evade duty but imposed interest on delayed payment. The Tribunal allowed the manufacturer's appeal, stating that the longer period for recovery was not justified due to no suppression or mis-declaration. The Department argued that interest was correctly charged under Section 11A(2B) and Explanation 2 was crucial.

2. Section 11A of the Act deals with recovery of unpaid duty within a specified period unless due to fraud or suppression. Section 11A(2B) allows a manufacturer to pay duty before a notice is served, avoiding further recovery. Explanation 1 excludes cases of fraud from this provision. Explanation 2 clarifies that interest is payable on voluntarily paid duty and any short-payment determined by the Officer.

3. The Court held that Explanation 2 does not alter the main provision of Section 11A(2B) but merely clarifies the interest liability. The provision prevents recovery if duty is voluntarily paid before a notice is issued. In this case, the limitation period had expired, making recovery impossible without voluntary payment. Applying interest in such cases would create an unintended burden on manufacturers.

4. The Court concluded that the Tribunal correctly reversed the Commissioner's decision on interest demand. The appeal was dismissed, emphasizing that Section 11A(2B) does not apply when the notice period has lapsed. The judgment highlighted the importance of interpreting statutory provisions in line with legislative intent and practical implications.

By analyzing the issues and the Court's detailed reasoning, the judgment provides clarity on the application of Section 11A(2B) in cases of voluntary duty payment and interest liability, ensuring a fair and just interpretation of the law.