2018 (5) TMI 1449 - AT - Central Excise

Liability of Interest and penalty - it was alleged that the appellant had issued supplementary invoices to collect differential price and the appellant discharged the duty liability at the rate of 14% and 10%, instead of discharging at the rate of 16% and 14% thereby leading to the short payment of duty - Held that - the impugned order alleging suppression by the appellant is not tenable in the facts and circumstances of the case. The appellant had a bona fide belief that the rate of duty as applicable at the time of raising the supplementary invoice and paid the said duty and also subsequently reversed the proportionate credit along with interest on 13/06/2012. The issue is settled in the case of CCE, Pune Vs. SKF india Ltd. 2009 (7) TMI 6 - SUPREME COURT wherein the Supreme Court has laid down that differential duty covered by sub-section (2B) of Section 11A attracts interest - the assessee is liable to pay interest on delayed payment of differential duty. Penalty - Held that - since there was no suppression on the part of the appellant and the appellant paid the duty after finalization of price, penalty not warranted and is set aside. Appeal allowed in part.

Summary

Issues:
1. Short payment of duty due to differential pricing on supplementary invoices.
2. Failure to pay interest on the differential duty collected.
3. Imposition of penalty under Section 11AC of the Central Excise Act, 1944.

Analysis:
1. The appeal was against an order upholding the short payment of duty due to differential pricing on supplementary invoices. The appellants, manufacturers of Tilled Gears and Tractor Gears, had issued supplementary invoices to collect differential prices on goods cleared, resulting in a short payment of duty amounting to &8377; 1,19,592. The Department issued a show-cause notice demanding the differential duty and interest on the unpaid amount. The adjudicating authority confirmed the demand and imposed a penalty under Section 11AC of the Act. The Commissioner(Appeals) rejected the appeal. The appellant argued that they cleared the goods under a bona fide belief of the duty rate applicable at the time of raising the invoices. The tribunal found that the appellant had a genuine belief in the duty rate applied and had subsequently corrected the error by paying the differential duty along with interest. The tribunal, following legal precedents, held the appellant liable to pay interest but dropped the penalty due to the absence of suppression of facts.

2. The issue of failure to pay interest on the differential duty collected was addressed by the tribunal. The Department demanded interest on the unpaid amount, which the appellant had failed to pay. The tribunal considered legal precedents, including a Supreme Court judgment, which established that interest is leviable on delayed payment of differential duty. The tribunal confirmed the interest liability on the appellant but dropped the penalty due to the absence of suppression of facts.

3. The imposition of penalty under Section 11AC of the Central Excise Act, 1944, was a key issue in the case. The appellant argued against the penalty, stating that there was no suppression of facts and that they had paid the duty after finalizing the prices. The tribunal, after considering the arguments from both sides and legal precedents, decided not to impose the penalty. The tribunal held that since there was no suppression on the part of the appellant and they had rectified the error by paying the duty with interest, it was not appropriate to impose a penalty. Consequently, the tribunal partly allowed the appeal by confirming the interest liability and dropping the penalty imposed by the lower authorities.