2015 (12) TMI 937 - AT - Central Excise

Demand of interest u/s 11AB and penalty u/s 11AC - Short payment of duty - Held that - Alleged short payment cannot be said to be attributable to any fraud, wilful misstatement, suppression of facts or deliberate violation of the provisions of the Central Excise Act, 1944 or of the Rules made there under with intent to evade payment of duty. During the period prior to 11.05.2001, the levy of interest under section 11AB was linked with the short levy, non-payment or erroneous refund being on account of fraud, wilful misstatement suppression of facts etc. Since these elements are not present in this case and since for this reason only, the Commissioner (Appeals) has set aside the penalty under section 11AC, there would not be any interest liability in this case, as the alleged short payment is in respect of the clearances made prior to 11.05.2001. Moreover, since the elements for invoking longer limitation period under proviso to Section 11A (1) are not there, in any case, the interest demand made after expiry of one year from the relevant date is time barred, in view of the Hon ble Delhi High Court in the case of Hindustan Insecticides Ltd. (2013 (8) TMI 225 - DELHI HIGH COURT). The impugned order is, therefore, not sustainable. - Decided in favour of assessee.

Summary

Issues:
1. Liability of interest under section 11AB for differential duty payment.
2. Applicability of limitation period for interest demand under Section 11A.
3. Interpretation of provisions regarding short payment without fraud or suppression of facts.
4. Consideration of elements for longer limitation period under proviso to Section 11A(1).

Analysis:
The case involved a dispute regarding the liability of interest under section 11AB for a differential duty payment made by the appellants, who were sugar manufacturers. The dispute arose from the conversion of free sale sugar into levy sugar on loan basis, which was later converted into a purchase of free sale sugar by the Central Government. The appellants paid the differential duty on 29.10.2001. Subsequently, a show cause notice was issued on 31.10.2002 for charging interest on the differential duty and imposing a penalty under section 11AC. The Assistant Commissioner confirmed the interest demand and penalty, which was appealed to the Commissioner (Appeals).

The appellant argued that since the alleged short payment was not due to fraud or wilful misstatement, the interest liability under section 11AB should not apply. They contended that the interest demand was time-barred as the duty was paid before the Finance Bill, 2001 received assent. The appellant also cited a judgment of the Delhi High Court regarding the applicability of the limitation period for interest demand under Section 11A.

The Departmental Representative defended the impugned order, supporting the findings of the Commissioner (Appeals). However, the Tribunal, after considering the submissions from both sides and perusing the records, held that the alleged short payment was not attributable to fraud or suppression of facts. Since the elements for longer limitation period were not present, the interest demand made after the expiry of one year from the relevant date was deemed time-barred. Citing the judgment of the Delhi High Court, the Tribunal set aside the impugned order, ruling in favor of the appellants and allowing the appeal.

In conclusion, the Tribunal found that the interest liability under section 11AB did not apply in this case due to the absence of fraud or suppression of facts. The Tribunal also emphasized the importance of considering the limitation period for interest demand under Section 11A, ultimately ruling in favor of the appellants and setting aside the impugned order.