2001 (9) TMI 192 - AT - Central Excise

Summary

Issues involved: Appeal against imposition of penalty and interest under Rule 173Q of the Central Excise Rules read with Section 11AC of the Central Excise Act.

Details of the Judgment:

1. Imposition of Penalty and Interest:
The dispute arose regarding components sent from one factory to another for use in manufacturing tractors, with a portion being sold as spare parts. The authorities imposed penalty and interest based on the value at which the spare parts were sold. The appellant argued that duty liability was discharged upon authorities pointing out the short levy, without a show cause notice or adjudication. They contended that penalty and interest were not legally tenable as the demand related to a period before the relevant sections came into force. The appellant highlighted that penalty under Rule 11AC and interest under Section 11AB require an order determining duty liability under Section 11A, which had not occurred in this case.

2. Legal Position and Proceedings:
No adjudication proceedings under Section 11A or any other provisions had taken place. The judgment emphasized that Sections 11AC and 11AB can only be invoked after a determination of duty evasion under Section 11A. Since no such determination had been made, the orders imposing penalty and interest were deemed unsustainable. It was clarified that penalty under Rule 173Q also cannot be imposed without proceedings on a charge of duty evasion. Consequently, the impugned orders were set aside, and the appeal was allowed with any consequential relief for the appellant.