2019 (2) TMI 563 - AT - Central Excise

Demand of interest u/s 11AB of CEA and penalty u/r 25 of the Central Excise Rules, 2002 - delayed payment of duty - the duty was not payable at all - Held that - The duty so paid by the appellant was not lawfully payable on the ground that the appellant had admittedly cleared un-branded Petrol and Diesel which attracts lower rate of duty in terms of Notification No. 4/06-CE. On this issue, the department has also not raised any SCN, therefore, the department itself has admitted that the appellant was eligible for lower rate of duty in terms of aforesaid Notification. Therefore, differential duty was not payable at all by the appellant. In this case, the duty which was paid by the appellant for which they were not liable to pay, the duty was paid voluntarily by the appellant. Therefore, the duty which was not lawfully required to be paid even though the appellant pay on their own, the department has no authority to recover interest or impose penalty with respect to such payment of duty even though belatedly - the provision of Section 11AB of Central Excise Act shall be applicable only in case where the duty which is lawfully required to be paid by an assessee and the same is not paid. Section 11A (2B) of CEA - Held that - The sub section (2B) is also applicable only in case where duty is payable with authority of law. Moreover, the appellant have not opted for sub section (2B) explicitly for the reason that, firstly, they have only paid the duty but did not pay the interest. Secondly, after payment of duty and interest, the appellant has to opt this provision in written by informing to the department which is not the case here, therefore, sub section (2B) is also not applicable. The duty which was not admittedly payable but paid by the appellant voluntarily, no interest or penalty can be demanded from the appellant - appeal allowed - decided in favor of appellant.

Summary

Issues:
Whether appellant is liable to pay interest under Section 11AB and penalty under Rule 25 of Central Excise Rules, 2002 on differential duty paid voluntarily, even though not lawfully payable, and SCN issued after limitation period.

Analysis:

1. Liability for Interest and Penalty:
The appellant cleared un-branded Motor Spirit and HSD on lower duty rates under Notification No. 4/06-CE but later converted some into branded fuel, paying differential duty voluntarily. The issue was whether interest and penalty were justified. The appellant argued that duty was not lawfully payable, citing relevant judgments. The department demanded interest under Section 11AB and imposed penalty under Rule 25. The Tribunal found that duty paid was not lawfully required, as lower rates applied to un-branded fuel, and no SCN was raised against the appellant. Thus, interest and penalty were not applicable.

2. Interpretation of Section 11AB:
Section 11AB states interest is payable if duty is not levied or paid. The appellant paid duty voluntarily, not being liable. The Tribunal clarified that interest applies only when duty lawfully required is unpaid. The provision does not cover situations where duty was paid voluntarily but not legally due. Therefore, interest under Section 11AB was not warranted in this case.

3. Sub Section (2B) Application:
Sub Section (2B) allows payment based on self-ascertainment before notice issuance. The appellant did not opt for this provision as they paid only duty, not interest. Moreover, explicit written notification to the department is required, which was absent. As the duty was not lawfully payable, Sub Section (2B) did not apply, precluding the imposition of interest or penalty.

Conclusion:
The Tribunal held that as duty paid voluntarily was not lawfully required, interest and penalty could not be demanded. The impugned order was set aside, and the appeal was allowed, emphasizing that interest and penalty provisions apply only when duty lawfully due is not paid.