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Petition under Section 35H(1) of the Central Excise Act, 1944 for referring questions of law to the Court - Allegation of misdeclaration of 'd' factor leading to evasion of excise duty - Levy of interest and penalty under Sections 11AB and 11AC - Validity of waiver of penalty and interest by the Tribunal. Analysis: The case involved a petition by the Department under Section 35H(1) of the Central Excise Act, 1944, seeking the Tribunal to refer questions of law to the Court regarding the misdeclaration of 'd' factor by the respondent, leading to evasion of excise duty. The respondent, engaged in manufacturing non-alloy steel products, had declared certain factors, including 'd', 'n', and 'I', for determining the Annual Production Capacity (APC) of the unit. Subsequent verification revealed a discrepancy in the 'd' factor, resulting in evasion of excise duty amounting to Rs. 5,14,585. The adjudicating authority issued a show cause notice invoking Section 11A of the Act and Rule 9(2) of the Rules, demanding the evaded duty, interest under Section 11AB, and mandatory penalty under Section 11AC. After hearings, the authority confirmed the demand, imposed interest at 12%, and levied a penalty of Rs. 5,15,000. However, the Commissioner (Appeals) later allowed the appeal, quashing the interest and penalty, stating that the respondent had discharged its duty liability. The Department, aggrieved by the appellate order, appealed to the Tribunal, which dismissed the appeal, citing the absence of wilful misdeclaration or suppression as grounds for interest and penalty imposition. The Court analyzed the case, noting that the show cause notice did not allege deliberate suppression or misdeclaration regarding the 'd' factor. The respondent's explanation, supported by the Managing Director, clarified the discrepancy as a misunderstanding in calculation, not deliberate misdeclaration. The Court held that the respondent could not be deemed guilty of misdeclaration, as the misunderstanding in disclosing the 'd' factor did not amount to deliberate misdeclaration warranting the extended limitation period under Section 11A. Consequently, the Commissioner (Appeals) and the Tribunal were correct in setting aside the interest and penalty imposed by the adjudicating authority. Thus, the Court dismissed the petition, stating that the questions posed by the Department did not necessitate consideration. In conclusion, the judgment highlighted the importance of establishing wilful misdeclaration or suppression before imposing interest and penalty under the Central Excise Act. The Court emphasized the need for clear evidence of deliberate wrongdoing to justify such punitive measures, ensuring fairness in excise duty enforcement.
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