2012 (10) TMI 818 - AT - Central Excise

Duty liability alleged that though the Government of India has issued a letter converting Levy Sugar Sale into Free Sale Sugar on 29-11-1999, the respondents discharged the duty liability almost one year and nine months after the order was issued by the Government of India Held that - Order of the Government of India issued in October, 1997 for supply of the sugar on loan basis under levy quota and the order dated 29-11-1999 converting the said supply into free sale sugar quota was known to the department inasmuch as copies of these orders have been endorsed to the department. Therefore, the department cannot allege suppression on the part of the respondent assessee Penalty Held that - Department was in the knowledge of the whole transaction inasmuch as the Government of India s orders have been communicated to the department - question of imposition of penalty under Section 11AC does not arise - reduction of penalty cannot be faulted

Summary

Issues:
Departmental appeal against Order-in-Appeal regarding differential duty liability, interest, and penalty imposition on sugar supply conversion from loan basis to free sale sugar.

Analysis:
1. Differential Duty Liability:
The case involved the conversion of sugar supply on loan basis to free sale sugar, leading to a differential duty liability of Rs. 2,37,006/-. The respondents paid this duty only on 8-8-2001, almost two years after the Government's order. The department alleged suppression, but as the orders were communicated to them, suppression couldn't be proven. The appellate authority correctly upheld the duty demand under Section 11A.

2. Interest Liability (Section 11AB):
The imposition of interest under Section 11AB was disputed. Before 11-5-2001, interest was applicable only in specific cases. However, post this date, interest applied in all instances of short payment. As the respondent discharged the duty on 8-8-2001, interest from 11-5-2001 to 8-8-2001 was deemed payable. The appellate authority erred in setting aside the interest demand, and the duty payer was liable for interest as per the law.

3. Penalty Imposition (Section 11AC):
Regarding penalty under Section 11AC, the department was aware of the sugar supply conversion due to communicated orders. Hence, the imposition of penalty did not stand. The appellate authority's decision to reduce the penalty to Rs. 2000 from the duty amount was upheld, as the circumstances did not warrant a penalty under Section 11AC.

In conclusion, the appeal was partly allowed, confirming the interest liability from 11-5-2001 to 8-8-2001 under Section 11AB. The penalty under Section 11AC was not applicable due to the department's knowledge of the transaction. The judgment upheld the duty demand but required the duty payer to pay interest for the period specified.