2008 (12) TMI 200 - AT - Central Excise

Interest delayed payment of duty effective date - For delay in making good the duty short paid for the clearances the assessee also paid the interest due of Rs. 5, 23, 359/- with effect from 11.5.01 For duty short paid for the clearances prior to 11.5.01 the department determined the applicable interest due from the assessee as Rs. 3, 51, 303/-. held that - Provisions of Section 11AB and Section 11A(2B) came into force w.e.f. 11-5-01. Therefore interest was payable for delay in payment of duty short paid on own ascertainment by the assessee before issue of Show Cause Notice by the department. As per the provisions of Section 11AB as it existed prior to 11-5-01 interest was not payable when short payment of duty had not occurred owing to fraud collusion willful mis-statement or suppression of facts or contravention of any other provisions of the Act or Rules with intent to evade payment of duty was determined under sub-section 2 of Section 11A. Therefore the demand of interest of Rs. 3, 51, 303/- relating to the period June 2000 to April 2001 is held to be unsustainable.

Summary

Issues:
1. Whether interest is payable for delay in payment of duty short paid on own ascertainment by the assessee before the issue of Show Cause Notice by the department.
2. Whether interest is sustainable for the period prior to May 2001 when there is no allegation of short payment of duty due to fraud, collusion, willful mis-statement, suppression of facts, or contravention of statutory provisions.

Analysis:

1. The case involved the appellants making clearances of excisable goods with a 2.5% cash discount abatement, which was not fully passed on to buyers. The appellants self-ascertained the duty due on the discounts not passed on and paid it to the government. For delays in making good the duty short paid from May 2001 onwards, the appellants paid interest. However, the department demanded interest for the period before May 2001 based on a Supreme Court judgment stating interest was a statutory obligation for delay in payment of duty. The Ld. Counsel for the appellants argued that interest was not sustainable for the period before May 2001 as there was no allegation of fraud, collusion, willful mis-statement, or contravention of statutory provisions to evade duty payment.

2. The Ld. Counsel relied on Section 11AB of the act as it existed before May 2001, which allowed interest only in cases of duty not levied or paid, short-levied or short-paid due to fraud, collusion, willful mis-statement, or contravention of statutory provisions with intent to evade duty payment. The Ld. Counsel also cited a Supreme Court judgment stating that when duty is deposited before a show cause notice is issued, no penalty or interest could be imposed. The department, however, supported the impugned order for interest payment relying on another Supreme Court judgment related to trade tax law.

3. The Tribunal examined the provisions of Section 11AB and Section 11A(2B) in detail. It noted that interest was payable for delays in payment of duty short paid on the assessee's own ascertainment before the issue of a Show Cause Notice. The Tribunal held that interest demand for the period before May 2001, amounting to Rs. 3,51,303, was unsustainable as there was no evidence of fraud or intent to evade duty payment. The Tribunal found the apex court judgment cited by the department irrelevant to the case at hand and partially allowed the appeal based on the specific provisions of the Act.

This detailed analysis of the judgment highlights the key issues of interest payment for delayed duty payment and the sustainability of interest demands in the absence of fraudulent activities, providing a comprehensive understanding of the legal reasoning and conclusions reached by the Tribunal.