2014 (11) TMI 496 - HC - Central Excise

Levy of interest - tribunal deleted the interest demand - period from 1-4-2001 to 31-1-2002 - Section 11AB of Central Excise Act, 1944, which stands amended with effect from 11-5-2001 - Held that - liability to pay interest would arise in case where there has been a delayed payment of duty as determined under Section 11A(2) of the Act, which was with an intention to evade payment of duty and in such circumstances, the assessee would be liable to pay interest. we have held that there was no intention on the part of the assessee to evade payment of duty and there was a dispute as regards the classification of the product. Therefore, the Tribunal was justified in deleting the interest. Even though interest on the duty demanded is statutory, yet when the statute requires the stated conditions as referred to above, the Tribunal rightly concluded that interest was not chargeable on the facts of the case. - Decided in favor of assessee. Eligibility to avail Modvat Credit - at the relevant point of time, the assessee was not registered with the Department - Held that - At the relevant point of time, the assessee was not registered with the Department and in fact, it subsequently obtained registration from the Department and therefore, if at all the assessee is entitled to any credit it would accrue only subsequent to the date of the registration with the Department. Even though the assessee claimed exemption on the ground that they had subsequently registered with the Department, as regards the liability as found in the order of adjudication as well as in the order of the Tribunal, we do not find any justifiable ground to accept the plea of the assessee based on the exemption Notification alone that the registration being not a mandatory one, the assessee would be entitled to the benefit of Modvat credit. - Decided against the assessee.

Summary

Issues Involved:
1. Whether the Appellate Tribunal is correct in setting aside the orders regarding payment of interest for the period in dispute.
2. Whether the Appellate Tribunal is correct in holding that the respondent has not misstated the description of the goods with intent to evade payment of duty.
3. Whether the Appellate Tribunal is correct in holding that the respondent can claim the benefit of Modvat credit on the yarns used in the manufacture of fabrics for the period in dispute.

Detailed Analysis:

1. Payment of Interest:
The issue revolves around whether the Appellate Tribunal was correct in setting aside the orders regarding the payment of interest for the period from 1-4-2001 to 31-1-2002 under Section 11AB of the Central Excise Act, 1944. The Tribunal observed that the respondent/assessee classified their products based on certain decisions of the Tribunal, which were later upheld by a larger bench. Therefore, the Tribunal concluded that there was no mis-statement or intent to evade duty, and accordingly, the interest levied was not justified. The High Court upheld this view, noting that the statutory conditions for interest under Section 11AB, which include intent to evade duty, were not met in this case.

2. Misstatement of Goods Description:
The Tribunal held that the respondent had not misstated the description of the goods with intent to evade payment of duty. The Tribunal noted that the respondent initially classified the goods based on certain Tribunal decisions, and there was a genuine dispute regarding classification. The High Court agreed with this assessment, stating that there was no evidence of fraud, collusion, or willful mis-statement by the respondent. The classification issue was settled when the respondent accepted the Department's classification and paid the duty, thus, there was no intention to evade duty.

3. Benefit of Modvat Credit:
The Tribunal allowed the respondent to claim Modvat credit on the yarns used in the manufacture of fabrics for the disputed period. However, the High Court found this decision to be incorrect. The High Court noted that the respondent was not registered with the Central Excise Department during the relevant period and had not followed the necessary procedural formalities. The First Appellate Authority had pointed out that the respondent did not fulfill the statutory conditions required for claiming Cenvat credit. The High Court concluded that the respondent could only avail of the credit after obtaining registration, which was not the case during the disputed period. Therefore, the High Court set aside the Tribunal's order allowing Modvat credit.

Conclusion:
The High Court partly allowed the appeal by setting aside the Tribunal's order regarding the penalty and interest while upholding the Tribunal's decision on the misstatement of goods description. The High Court also set aside the Tribunal's order allowing Modvat credit, emphasizing the necessity of registration and procedural compliance for claiming such credit.