2017 (11) TMI 707 - AT - Central Excise

Penalty - Liability of interest - relevant date - interest chargeable prior to 11/05/2001, i.e. before the amendment of Section 11AB - whether in case of short payment of duty demand due to difference in calculation of value under the Valuation Rules, 2000, the appellants are liable for payment of interest and penalty? - Held that - identical issue decided in the appellant own case NRB Bearings Ltd. Versus CCE, Mumbai-III 2017 (11) TMI 335 - CESTAT MUMBAI , where it was held that the interest u/s 11AB is inevitable wherever there is a delay in payment of duty. As regards the demand of interest, the interest before 11/05/2001 was chargeable only when the non-payment of duty is due to the reason of suppression of fact mis-declaration, fraud, collision, etc. In the present case admittedly there is no such charge on the appellant, therefore the interest for the period prior to 11/05/2001 is not chargeable. The adjudicating authority should re-calculate the interest and recover the same only for the period from 11/05/2001 till the date of payment of the differential duty - appeal allowed in part and part matter allowed by way of remand.

Issues Involved:
Short payment of duty leading to demand of interest and imposition of penalty. Interpretation of Section 11AB regarding chargeability of interest prior to 11/05/2001. Applicability of penalty in case of short payment of duty due to difference in calculation of value under Valuation Rules, 2000.

Analysis:

Issue 1: Short payment of duty and imposition of penalty
The case involved the appellant manufacturing components for needle roller bearings and using them captively for needle bearings in various plants. Certain overheads were not considered while calculating the assessable value, resulting in a short payment of duty. The appellant paid the differential duty, but a show-cause notice was issued for interest and penalty. The Commissioner (Appeals) confirmed the demand of interest and imposed a penalty of ?30,000. The consultant for the appellant argued that interest before 11/05/2001 was chargeable only in case of suppression of fact, which was not present in this case. Citing a previous Tribunal judgment, the consultant requested setting aside the penalty, which was granted based on the previous ruling.

Issue 2: Interpretation of Section 11AB
The main question was whether interest and penalty were applicable in cases of short payment of duty due to differences in valuation. The Tribunal analyzed the provisions of Section 11AB and previous judgments to determine the chargeability of interest. It was established that interest prior to 11/05/2001 was only chargeable in cases of suppression of fact, mis-declaration, collusion, or fraud. Since there was no such charge on the appellant in this case, interest for the period before 11/05/2001 was deemed not chargeable. The Tribunal referred to a previous case involving National Fertilizers Ltd. to support this interpretation and concluded that interest could only be claimed from 11/05/2001 onwards.

Issue 3: Applicability of penalty
The Tribunal further examined the applicability of penalty in cases of short payment of duty. Relying on previous judgments and the provisions of Section 11AB, it was determined that the penalty of ?30,000 imposed on the appellant was not justified as there was no suppression of fact. Following the same reasoning as in a previous Tribunal order, the penalty was set aside, and the adjudicating authority was directed to re-calculate the interest only from 11/05/2001 till the date of payment of the differential duty. The appeals were partly allowed based on the above considerations.

This comprehensive analysis of the judgment highlights the key issues of short payment of duty, interpretation of Section 11AB, and the applicability of penalty in such cases, providing a detailed insight into the Tribunal's decision-making process.

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