2015 (2) TMI 601 - AT - Central Excise

Differential duty - Appellant, in terms of the orders of Central Government, had cleared 6809 qntl. of sugar from their free sale sugar quota as levy sugar on loan basis by paying duty at the rate applicable for levy sugar. Subsequently, the Central Government paid the difference between the price of levy sugar and price of free sale sugar to the appellant alongwith the element of differential duty and before this, the National Federation of Cooperative Sugar Mills as well as Indian Sugar Association had been notified about this decision of the Government - Imposition of interest and penalty - Held that - Once the assessee received the element of differential excise duty, that amount, in any case, would become payable to the Central Government. There is no dispute that the appellant have already paid this amount on 20th August 2002. Therefore, so far as the duty demand is concerned, the impugned order has to be upheld. However, as regards the interest under Section 11AB and penalty under Rule 173Q (1), the interest under Section 11AB during that period would be attracted only when any short payment of duty occurred due to fraud, wilful mis-statement or deliberate violation of provisions of Central Excise Act, 1944 or of the Rules made thereunder, but these elements are not present in this case. Therefore, interest liability under Section 11AB would not arise and, hence, the impugned order upholding the levy of interest under Section 11AB being not sustainable has to be set aside. In the circumstances of the case, there is also no justification for penalty under Rule 173Q as this is not the case of deliberate short payment in contravention of the provisions of Central Excise Rules. In view of this, the imposition of penalty would also not be sustainable. - while the duty demand of ₹ 2,24,697/- is upheld, the interest under Section 11AB and penalty under Rule 173Q (1) is set aside - Decided partly in favour of assessee.

Summary

Issues:
1. Duty demand confirmation under Section 11A (2) of the Central Excise Act, 1944.
2. Imposition of interest under Section 11AB.
3. Imposition of penalty under Rule 173Q (1) of the Central Excise Rules.

Analysis:
1. The appellant, a sugar mill, had cleared sugar as levy sugar on a loan basis and paid duty at the applicable rate. The Central Government reimbursed the price difference between levy sugar and free sale sugar, along with the differential duty. The Jurisdictional Assistant Commissioner confirmed the duty demand against the appellant, which was upheld by the Commissioner (Appeals). The Tribunal upheld the duty demand as the appellant had already paid the amount. However, the interest under Section 11AB and penalty under Rule 173Q (1) were disputed.

2. The Tribunal determined that interest under Section 11AB is attracted only in cases of fraud, wilful misstatement, or deliberate violation of the Central Excise Act or Rules. Since these elements were not present in this case, the interest liability was deemed not sustainable. Therefore, the Tribunal set aside the imposition of interest under Section 11AB.

3. Regarding the penalty under Rule 173Q (1), the Tribunal found no justification for imposing a penalty as there was no deliberate short payment in contravention of the Central Excise Rules. Consequently, the imposition of the penalty was deemed unsustainable. The Tribunal modified the impugned order by upholding the duty demand while setting aside the interest under Section 11AB and the penalty under Rule 173Q (1). The appeal was partly allowed.