2011 (9) TMI 873 - AT - Central Excise

Interest demand u/s 11AB - Penalty under Rule 25 of the Central Excise Rules, 2002 - Held that - It cannot be gainsaid that the duty payments were made under Section 11A(2B) of the Central Excise Act. This is because each payment of differential duty at depot was tacit admission of short-payment of duty at factory gate. The duty short-paid was self-determined by the assessee and voluntarily paid before issuance of any show-cause notice to them - assessee was working under sub-section (2B) of Section 11A of the Act - assessee has a liability to pay interest on the differential duty under Section 11AB. But Explanation 3 protects them from penalty. Though explanation was inserted only in 2010, it is a clarificatory provision having retrospective effect and, therefore, the appellant can claim under it - demand of interest on differential duty is sustained and the penalty is set aside - Decided partly in favour of assessee.

Summary

Issues:
Appeal against demand of interest on duty under Section 11AB of Central Excise Act and penalty under Rule 25 of Central Excise Rules, 2002.

Analysis:
1. The appellant contested demands of interest and penalty raised by the Department. The original authority confirmed the interest demand and imposed a penalty, which was upheld by the Commissioner (Appeals). The appeal questions the appellate Commissioner's order.

2. The appellant's counsel argued that duty payments were made at "places of removal" within the statutory period, hence no interest should be payable. Reference was made to a case supporting this argument.

3. On the contrary, the Department representative relied on a different case to assert that interest under Section 11AB is applicable as payments were made under Section 11A(2B) of the Act, justifying the penalty imposed.

4. The Tribunal noted that duty payments were indeed made under Section 11A(2B) of the Act, indicating self-determination of short-payment before any notice. The appellant claimed payments were made under intimation to the proper officer, falling under Section 11A(2B). Explanations 2 and 3 of this sub-section were deemed relevant.

5. Explanation 2 clarified the liability to pay interest on differential duty under Section 11AB, while Explanation 3 protected against penalty for such payments. Despite being inserted in 2010, Explanation 3 was considered clarificatory with retrospective effect, allowing the appellant to benefit from it.

6. Consequently, the demand for interest on differential duty was upheld, while the penalty was set aside based on the explanations provided.

7. The Tribunal acknowledged conflicting decisions from Karnataka High Court and Madras High Court, with the former supporting the interest demand. As per legal precedent, the Tribunal followed the view of the jurisdictional High Court, leading to a partial allowance of the appeal.

8. The judgment was pronounced and dictated in open court, partially allowing the appeal against the interest demand while setting aside the penalty.