2017 (12) TMI 1304 - AT - Central Excise

Benefit of reduced penalty u/s 11AC - denial on the ground that the appellant did not pay the interest amount under Section 11AB of the Central Excise Act, 1944 attributable to the late payment of the duty amount - SSI exemption - Held that - Since, the period covered under the dispute relates to the period prior to the substitution of new Section 11AB of the Act, the provisions of such amended rule will not be applicable in the case of the appellant herein. Therefore, the appellant should get the benefit of payment of reduced amount of penalty of 25% in terms of Section 11AC ibid - appeal allowed - decided in favor of appellant.

Summary

Issues:
Claim of SSI exemption denied due to use of brother's brand name, denial of reduced penalty benefit for non-payment of interest under Section 11AB.

Analysis:
The appellant's SSI exemption claim was rejected by the department for using the brand name of his brother's business, deemed impermissible for SSI benefit. The appellant admitted duty liability and paid the duty before a show cause notice was issued. The deposited amount was adjusted against confirmed duty demand. The appeal concerns the denial of the reduced penalty benefit by the authorities, citing non-payment of interest under Section 11AB of the Central Excise Act, 1944.

The appellant's advocate argued that Section 11AB requires interest payment only when duty liability is determined by the adjudicating authority and not paid within 90 days. As the duty amount was fully deposited before adjudication, interest liability should not apply as per the un-amended Section 11AB. The appellant had no outstanding duty at the time of adjudication, as the paid amount exceeded the confirmed demand. Therefore, interest liability cannot be imposed retroactively, and the appellant should receive the benefit of reduced penalty under Section 11AC.

The Revenue's representative reiterated the findings in the impugned order, but the Tribunal examined the case records. It was established that the appellant had paid the disputed amount before adjudication, eliminating any outstanding duty liability. The Tribunal noted that under the pre-amended Section 11AB, interest liability is triggered only if duty remains unpaid for 90 days after determination. As the appellant had paid in full before adjudication, the reduced penalty benefit should apply under Section 11AC, not the amended Section 11AB effective from May 11, 2001.

Consequently, the Tribunal set aside the impugned order denying the reduced penalty benefit and allowed the appeal in favor of the appellant, granting consequential benefits. The appellant was entitled to the reduced penalty of 25% under Section 11AC due to full payment before adjudication, as the amended Section 11AB did not apply retroactively to the appellant's case.