2006 (4) TMI 173 - HC - Central Excise

Summary

Issues Involved:
1. Recovery of differential duty and penalty.
2. Validity of the appeal filed by the petitioners.
3. Application of the Kar Vivad Samadhan Scheme (KVSS), 1998.
4. Rejection of KVSS declaration by the Designated Authority.
5. Demand for interest under Section 11AA of the Central Excise Act, 1944.

Detailed Analysis:

1. Recovery of Differential Duty and Penalty:
The petitioners, engaged in the manufacture of various textile products, were served with 14 Show Cause Notices for recovery of differential duty amounting to approximately Rs. 50 lakhs for the period from October 1994 to February 1997. The Assistant Commissioner of Central Excise confirmed these demands along with interest and imposed a penalty of Rs. 5,000. Due to incorrect computation, the Range Superintendent reworked the duty amount to Rs. 9,40,753 and issued a demand notice on 18th May 1998.

2. Validity of the Appeal Filed by the Petitioners:
Dissatisfied with the order dated 12th November 1997, the petitioners filed an appeal before the Commissioner of Central Excise (Appeals) on 2nd September 1998, along with a stay application. The Commissioner directed the petitioners to deposit the entire amount of duty and penalty within four weeks. The Tribunal later held that the appeal was filed within time and remanded the matter back to the Commissioner (Appeals) for fresh disposal. On remand, the Commissioner (Appeals) upheld the original order on 29th June 2001.

3. Application of the Kar Vivad Samadhan Scheme (KVSS), 1998:
The Finance (No. 2) Act, 1998 introduced the KVSS, allowing settlement of tax arrears by paying 50% of the disputed tax. The petitioners filed a declaration under Section 89 of the Finance Act, 1998, on 31st December 1998. However, the Designated Authority rejected this declaration on 25th February 1999, stating that the appeal was filed after the limitation period had expired and the delay was not condoned.

4. Rejection of KVSS Declaration by the Designated Authority:
The petitioners challenged the rejection of their KVSS declaration, arguing that their appeal was within time as held by the Tribunal. Despite representations for reconsideration, the Designated Authority maintained that the KVSS was no longer in existence. The Supreme Court's ruling in Shatrusailya Digvijaysingh Jadeja clarified that an appeal does not cease to be an appeal if it is barred by time or otherwise incompetent, and the Department could not reject the KVSS declaration on the ground that no case was pending.

5. Demand for Interest under Section 11AA of the Central Excise Act, 1944:
After the finality of the order dated 12th November 1997/18th May 1998 and the payment of duty and penalty on 7th October 2004, the Office of Superintendent of Central Excise demanded interest of Rs. 11,58,647 under Section 11AA for delayed payment of duty. Despite repeated demands, the petitioners failed to pay the interest, leading to further correspondence.

Conclusion:
The petitioners' writ petition challenging the rejection of their KVSS declaration and the demand for interest was dismissed. The court held that the petitioners had accepted the finality of the order dated 29th June 2001 and had paid the due amount of duty and penalty. Therefore, no dispute regarding duty and penalty remained, and the petitioners were not entitled to any relief. The writ petition was dismissed with no order as to costs.