2018 (3) TMI 1274 - AT - Central Excise

Demand of duty with interest - demand on the ground that the applicant is not contesting the payment of duty and interest - Held that - The Hon ble Allahabad High Court in the case of J.K. Cotton Spinning & Weaving Mills Co. Ltd. 2013 (9) TMI 62 - ALLAHABAD HIGH COURT held that by application of Sections 22 & 32 of Act, 1985, recovery proceedings against the assessee were not maintainable - it is required to examine the BIFR Order. The appellant should be given an opportunity to place the records in respect of BIFR order for claiming exemption from payment of interest - appeal allowed by way of remand.

Summary

Issues: Rectification of Mistake in Final Order regarding demand of duty and interest; Contesting demand of interest; Appellant's financial difficulties; Imposition of penalty; Appellant under BIFR; Exemption from payment of interest based on BIFR order.

In this judgment, the applicant filed an application for Rectification of Mistake in the Final Order regarding the demand of duty and interest. The Tribunal had set aside the penalty but upheld the demand of duty and interest, noting that the appellant did not contest the payment of duty and interest. However, the applicant argued that they were contesting the demand of interest, as evidenced by the appeal before the Commissioner (Appeals). The Tribunal passed the Final Order ex parte, leading to a dispute over the contestation of interest.

The Revenue contended that interest is payable along with the demand of duty, and there was no error in the Tribunal's Final Order. Upon hearing both sides and examining the appeal records, the Tribunal reviewed the relevant portion of the Final Order and found discrepancies in the contestation of interest by the appellant. The appellant claimed financial difficulties and registration with BIFR, suggesting challenges in discharging tax liability on time.

Regarding the imposition of equivalent penalty, the Tribunal observed that there was no malafide intention on the appellant's part to evade payment of Service Tax, as the tax liability was duly reflected in the returns filed with the Department. The Tribunal allowed the appeal only to the extent that no penalty was imposed, based on the lack of intention to evade tax payment.

The main contention raised by the appellant was that the Tribunal's finding on the contestation of duty liability and interest was incorrect. The appellant argued that they were contesting the demand of interest and penalty, contrary to the Tribunal's observation. The issue of demand of interest was then extensively discussed with reference to the appellant's status under BIFR.

The appellant, being under BIFR during the material period, claimed exemption from payment of interest based on a judgment of the Hon'ble Allahabad High Court. The Tribunal acknowledged the BIFR status of the appellant and the relevant legal precedent, emphasizing the need to examine the BIFR Order to determine the applicability of interest exemption. Consequently, the Final Order upholding the demand of interest was recalled, and the matter was remanded to the adjudicating authority for a decision in accordance with the law, ensuring a fair opportunity of hearing for the appellant. All issues were kept open for further evidence presentation by both sides.