2018 (11) TMI 898 - AT - Central Excise

Imposition of penalty - demand of interest - appellant had deposited the entire duty even before the issuance of SCN - no malafide intent - Held that - The appellant was a state corporation and was manufacturing various items for their own captive use. As the said goods were being consumed by them captively and were not being sold, there could be a bonafide belief on their part that the same would not attract duty of excise. The revenue has also not produced any evidence to show that the said non-payment of duty was with a malafide intention - imposition of penalty on the appellant is neither justified nor warranted. Demand of Interest - Held that - Hon ble Supreme Court in the case of Rajasthan Spinning & Weaving Mills 2009 (5) TMI 15 - SUPREME COURT OF INDIA , has held that interest is payable even when duty is paid before issuance of the show-cause notice - the appellant is under legal obligation to pay the interest in respect of differential duty from the date when the same became payable till the date it was paid - demand of interest upheld. Appeal allowed in part.

Summary

Issues:
Confirmation of duty against the appellant for manufacture and captive consumption of goods, imposition of penalty, and payment of interest.

Confirmation of Duty and Imposition of Penalty:
The Tribunal's previous order confirmed duty against the appellant, but interest and penalty were set aside due to the appellant being a state government entity and having deposited the duty before the show-cause notice. The High Court set aside the Tribunal's order and remanded the matter for fresh consideration based on a Supreme Court ruling. The appellant believed duty was not payable for goods used internally. The penalty under Section 11AC was contested, citing the Supreme Court's clarification that penalty imposition depends on the circumstances of each case. As the appellant was a state corporation using goods internally without evidence of malafide intent, the penalty was set aside.

Payment of Interest:
The Supreme Court clarified that interest is payable even if duty is paid before a show-cause notice. The appellant, being a state corporation, was obligated to pay interest on the differential duty from the due date until payment. The adjudicating authority will calculate the interest amount for the appellant to deposit. In conclusion, the penalty was set aside, and the appellant was directed to pay the interest amount on the differential duty as per legal obligations.