2014 (11) TMI 574 - HC - Central Excise

Imposition of Penalty and interest - assessee had paid duty before the show cause notice - Suppression of facts - whether the assessee s claim was bona fide or as to whether the assessee has acted in a manner willfully evading the payment of tax - Held that - The requirement as to suppression of fact of willful mis-statement with an intent to evade payment of duty as conferred in Section 11AB of the Act was however given up and Section 11AB by itself substituted by Act 14 of 2001 - Section 125 with effect from 11-5-2001. Thus, during the relevant material time, Section 11AB as it stood then, would stand attracted on the levy of interest on delayed payment of duty only when excise duty was not levied or paid or short-levied or short paid or erroneously refunded by reason of fraud, collusion or any willful mis-statement or suppression of facts or contravention of any of the provisions of this Act or the rules made thereunder with intent to evade payment of duty. Thus, when the explanation given by the assessee is found to be bona fide and when the action of the assessee did not lack bona fide and when there being no intention to evade payment of duty, the Tribunal rightly set aside the payment of interest and penalty. In such circumstances, going by the provisions of the said Act and the facts found by the Tribunal, we have no hesitation in confirming the order of the Tribunal - Decided against Revenue.

Summary

Issues:
- Whether duty on technical assistance charges should be demanded from the assessee?
- Whether penalty under Section 11AC of the Central Excise Act, 1944 is mandatory?
- Whether interest liability accrues under Section 11AB of the Central Excise Act, 1944 whenever there is belated payment of duty?

Analysis:
1. Duty on Technical Assistance Charges:
The case involved the demand of excise duty on technical assistance charges received by the assessee for development of Carburetors. The assessee contended that they acted as a conduit transferring the charges to their Japanese technical collaborator without any monetary gain. The Original Authority upheld the demand, but the Tribunal accepted the assessee's explanation, citing the Supreme Court's decision in a similar case. The High Court found the assessee's actions bona fide, as they promptly amortized the charges upon detection and agreed to pay the duty. The Court disagreed with the lower authorities' view that the plea was not supported by documentary evidence, holding that the assessee's conduct was not willful tax evasion.

2. Penalty under Section 11AC:
The Revenue challenged the Tribunal's decision on the penalty under Section 11AC. The High Court examined the relevant provisions and noted that Section 11AB, which mandates interest on delayed duty payment due to fraud or willful misstatement, was not applicable in this case. The Court emphasized that since there was no intent to evade duty and the assessee's explanation was found to be bona fide, the Tribunal's decision to not impose a penalty under Section 11AC was justified.

3. Interest Liability under Section 11AB:
The issue of interest liability under Section 11AB was also raised in the appeal. The High Court analyzed the legal framework and observed that Section 11AB required willful misstatement or suppression of facts to apply, which was absent in this case. The Court highlighted the Tribunal's finding that the assessee had paid duty before the show cause notice, indicating no basis for demanding penalty or interest. Considering the legal provisions applicable at the relevant time, the Court concurred with the Tribunal's decision to not levy interest or penalty under Sections 11AB and 11AC.

In conclusion, the High Court dismissed the Civil Miscellaneous Appeal, affirming the Tribunal's decision based on the assessee's bona fide conduct, absence of willful tax evasion, and the legal provisions governing the levy of interest and penalty under the Central Excise Act, 1944.